A home owner obtained a mortgage 5 years ago for omr 105000, Ask an Expert

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A home owner obtained a mortgage 5 years ago for OMR 105,000 at 13% amortized over 30 years (monthly payments). Mortgage rates have dropped, so that a 25- year loan can be obtained at 11% . There is no prepayment penalty on the mortgage balance of the original loan, but five points will be charged on the new loan other closing costs will be OMR 3,000.

a. Should the borrower refinance if he plans to be in the home for the remaining loan term? Assume the homeowner borrows only an amount equal to the outstanding balance of the loan .

b. Would your answer to part (a) change if he planned to be in the home for only five more years? why?

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Financial Management, Finance

Category:- Financial Management
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