Mortgage refinancing
the interaction of break even period, taxes, NPV, and IRR
DOI:
https://doi.org/10.61190/fsr.v16i3.4890Keywords:
Excel, Simulation, NPV, IRR, Breakeven, Taxes, Refinancing, MortgageAbstract
This paper develops a refinance model that provides pertinent information for investors about refinancing their mortgage. We discuss the input variables and how to compute the breakeven number of months when deciding to refinance a mortgage. We incorporate the interest rate tax effects that are normally ignored by investors when making their refinancing decision. We also compute the net present value and internal rate of return to allow one to analyze refinancing as an investment decision. Additionally we have developed an Excel model, complete with automated macros, to perform this analysis.
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