You are considering refinancing a rental property of yours.
Based upon the following data would you refinance? (Show Work) (5 points)
Current L..;@ 7.5 interest
New L..;@ 5.5 interest
Financing costs on new loan: 1 point origination fee
1 point discount
$600 closing cost
Assume a 20—year term on both loans. No prepayment penalty on current loan.
Investor’s desired rate of return is 10%.
Expected holding period of 5 years.