When you buy a house, you also "buy" an interest rate. That is, depending on the...

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When you buy a house, you also "buy" an interest rate. That is,depending on the conditions of the housing market and the currentfederal interest rate, you get locked into a rate for the durationof your loan agreement by the bank that sells you the loan. Thoughthere are many home loan durations (often terminating at the timecalled the "pay-off" date), the most typical for home-buyers is 30years.
Suppose you buy a new home for $200,000 at 4.5% APR. Afterhaving owned the home for 5 years, you are offered a refinance for4.25% APR for the remainder of your loan duration. Of course, thisreduces your payment... but, there are closing costs which amountto 3% of what you owe on the loan at the time of refinance. Afterthe refinance, how long would you have to own the home for in orderto "break even" with the closing cost fees you paid to refinance?(Assume you pay the refi costs out-of-pocket at the time ofrefinance.)
NOTE: The APR is calculated in a more complicated way than wewill let-on here. Assume APR is the same rate concept developed inour modules on interest rates. Also, we can assume the interest iscompounded monthly on a mortgage.

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In the given scenario first of all remaining balance of the loan at the end of 5 years needs to be calculated For this monthly payment towards loan must be calculated Formula to calculate monthly payments Pmt Ar 11rn The principal loan amount is A the See Answer

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When you buy a house, you also "buy" an interest rate. That is,depending on the conditions of the housing market and the currentfederal interest rate, you get locked into a rate for the durationof your loan agreement by the bank that sells you the loan. Thoughthere are many home loan durations (often terminating at the timecalled the "pay-off" date), the most typical for home-buyers is 30years.Suppose you buy a new home for $200,000 at 4.5% APR. Afterhaving owned the home for 5 years, you are offered a refinance for4.25% APR for the remainder of your loan duration. Of course, thisreduces your payment... but, there are closing costs which amountto 3% of what you owe on the loan at the time of refinance. Afterthe refinance, how long would you have to own the home for in orderto "break even" with the closing cost fees you paid to refinance?(Assume you pay the refi costs out-of-pocket at the time ofrefinance.)NOTE: The APR is calculated in a more complicated way than wewill let-on here. Assume APR is the same rate concept developed inour modules on interest rates. Also, we can assume the interest iscompounded monthly on a mortgage.