Mortgage Agent Licensing Practice Exam · Question
Michael is considering breaking his current 5-year fixed mortgage with a remaining balance of $300,000 and 3 years left at 3.50% compounded semi-annually. The current market rates for a similar 3-year term are 2.99% compounded semi-annually. What penalty would Michael pay if he refinanced today?
3-month interest penalty = $300,000 * 0.0350 * (3/12) = $3,150.00. IRD penalty requires calculating the difference in present value of future payments, which wo
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Question: Michael is considering breaking his current 5-year fixed mortgage with a remaining balance of $300,000 and 3 years left at 3.50% compounded semi-annually. The current market rates for a similar 3-year term are 2.99% compounded semi-annually. What penalty would Michael pay if he refinanced today?
Answer options: ✅ $3,150.00 (3-month interest)
- $4,500.00 (IRD)
- $4,350.00 (3-month interest)
- $6,750.00 (IRD)
Correct answer: $3,150.00 (3-month interest)
Explanation: 3-month interest penalty = $300,000 * 0.0350 * (3/12) = $3,150.00. IRD penalty requires calculating the difference in present value of future payments, which would be lower than the 3-month interest for this rate difference.
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