Five years ago you took out a $120,000, 30-year mortgage at 9% interest, with no prepayment penalty. Suppose today you can get 30-year mortgages at 7 percent with 2 points, and you plan to be in your house another five years. What would be the before-tax NPV of refinancing ignoring transaction costs and option value)?
NPV = +$7,021. @ Mkt OCC = 7.49%, Old loan PV = 122077, less Old loan OLB = 115056

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The Answer of Five years ago you took out a $120,000, 30-year mortgage at 9% interest, with no prepayment penalty. Suppose today you can get 30-year mortgages at 7 percent with 2 points, and you plan to be in your house another five years. What would be the before-tax NPV of refinancing ignoring transaction costs and option value)?
NPV = +$7,021. @ Mkt OCC = 7.49%, Old loan PV = 122077, less Old loan OLB = 115056

Five Years Ago You Took Out a $120,000, 30-Year Mortgage