9. Mortgage Refinancing Quiz

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What is the purpose of calculating the payback period?

To determine the new interest rate

To evaluate the financial benefits of refinancing (correct)

To determine the original loan amount

To calculate the monthly savings

Why is it essential to review the loan terms and conditions when refinancing?

To determine the new interest rate

To determine the loan balance

To avoid unexpected costs (correct)

To calculate the prepayment penalty

When does a soft prepayment penalty apply?

When refinancing to a lower interest rate

When refinancing within a specified period (correct)

When making an early balance payment

When selling the home

Why is it important to calculate the payback period?

To evaluate the financial benefits of refinancing Signup and view all the answers

What is the estimated monthly savings if you refinance your $200,000 mortgage from a 6% interest rate to a 4.5% interest rate for 30 years?

$186 Signup and view all the answers

If you refinance your mortgage to a 4.5% interest rate for 30 years with $3,000 in closing costs, how long would it take to recover the closing costs?

16 months Signup and view all the answers

What is the prepayment penalty if you decide to pay off the entire loan balance of $150,000 with a 3% prepayment penalty?

$3,000 Signup and view all the answers

Are you legally obligated to receive a mortgage disclosure statement before finalizing your loan?

True Signup and view all the answers

By how many months will you shorten the loan term if you refinance from a 30-year to a 20-year mortgage?

120 months Signup and view all the answers

What type of prepayment penalty is a flat $2,500 fee?

Flat fee penalty Signup and view all the answers

What does a no closing costs or origination fees loan on $5,000 mean?

No upfront fees Signup and view all the answers

What is the best approach to no out-of-pocket cost loans?

Consider budget and explore options first Signup and view all the answers

What is the downside of extending the loan term?

More interest paid overall Signup and view all the answers

What is the benefit of consolidating other debts into your mortgage?

Simplifies debt management Signup and view all the answers

If your home appraises for $250,000 and your current balance is $150,000, how much equity do you have?

$100,000 Signup and view all the answers

What is the LTV when your home is worth 200,000, and you have a remaining mortgage of 180,000?

50% Signup and view all the answers

When is PMI required?

When LTV is at or above 80% Signup and view all the answers

What is the typical treatment of refinancing costs like closing fees?

They depend on the lender Signup and view all the answers

What is the term for the period required to maintain an LTV below 80% to cancel PMI?

LTV seasoning period Signup and view all the answers

How many months of PMI payments would it take to offset 3,000 in closing costs if the PMI is in closing costs if the PMI is 100/month?

10 months Signup and view all the answers