A borrower has a 30-year fixed-rate mortgage at 4.5% with 25 years remaining. They want to refinance to a 15-year fixed-rate mortgage at 4.0%. The monthly payment will increase by $400. Under what circumstances would this refinance meet the tangible net benefit requirement?
Correct Answer
B) If the total finance charges over the life of the new loan are less than the remaining finance charges on the existing loan
Under the ATR rule's refinance provisions, a refinance that reduces the loan term can meet the tangible net benefit requirement if the total finance charges over the life of the new loan are less than the remaining finance charges on the existing loan, even if monthly payments increase.
Why This Is the Correct Answer
Under the ATR rule's refinance provisions, a refinance that reduces the loan term can meet the tangible net benefit requirement if the total finance charges over the life of the new loan are less than the remaining finance charges on the existing loan, even if monthly payments increase.
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