Suppose you purchased a house three years ago by paying 20% down, assuming the first mortgage, and taking a second mortgage (loan) in the amount of $30,000. The term of the second mortgage is 10 years, with a nominal interest rate of 18% compounded monthly. Since that time, interest rates have dropped to 15% on second mortgages. Refinancing the loan will cost you a $100 penalty plus $1,000 in new loan fees. Should you refinance the second mortgage if you intend to keep the house for the next seven years?