A borrower has secured a 30 year, $120,000 loan at 7%. Fifteen years later the borrower has the opportunity to refinance with a 15- year mortgage at 6%. The cost of refinancing which will be paid upfront in cash is $5,000.
a) Should the borrower refinance?
b) Should the borrower refinance if s/he expects to remain in the home only 5 years?