Assume that you are 10 years into a 30 year home loan at 5.3%. You owe $280,000 left on your home at this time. You can refinance your loan at 3.1% for 20 years; however the closing costs will be around $3,500.
a. If you go for refinancing, how many more months would you need to live in the home in order to get the closing cost back? Ignore time value of money and tax credits of the interest payments.
b. Answer part (a) again considering time value of money and MARR 10% compounded monthly. Ignore tax credits of interest again.