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Mortgage Loan

In: Business and Management

Submitted By yg0660798
Words 271
Pages 2
When Brittany Peter and Paul Peter were “house hunting” five years ago, the mortgage rates were pretty high. The fixed rate on a 30-year mortgage was 8.75% while the 15-year fixed rate was at 8%. After walking through many homes, they finally reached a consensus and decided to buy a $200,000 two-story house in an up and coming suburban neighborhood in the Midwest. To avoid prepaid mortgage insurance (PMI) the couple had to borrow from family members and come up with the 20% down payment and the additional required closing costs. Since Brittany and Paul had already accumulated significant credit card debt and were still paying off their college loans, they decided to opt for lower monthly payments by taking on a 30-year mortgage, despite its higher interest rate.

Currently, due to worsening of economic conditions, mortgage rates have come down significantly and the “refinancing” frenzy is under way. Brittany and Paul have seen 15- year fixed rates (with no closing costs) advertised at 5% and 30-year rates at 5.75%. Brittany and Paul realize that refinancing is quite a hassle due to all the paperwork involved but with rates being down to 30-year lows, they don’t want to let this opportunity pass them by. About 2 years ago, rates were down to similar levels but they had procrastinated, and had missed the boat. This time, however, the couple called their mortgage officer at MBA bank and locked in the 5%, 15-year rate. Nothing was going to stop them from reducing the costs of paying off their dream house this…...

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