Five years ago a borrower took a mortgage for $80,000 at 10% for 30 years, monthly payments. Currently the market rate is 8% on 25-year mortgages. The existing mortgage has a prepayment penalty of 5% of the outstanding balance and the lender will charge 4% closing cost on a new loan. Use both methods (with and without discounting) to calculate total savings.

a. If the borrower plans to hold either mortgage for the next 25 years, should they refinance?

b. If the borrower plans to hold either mortgage for 8 more years only, should they refinance?

c. If the new loan term is 30 years (instead of 25 years) and the borrower plans to hold it until the end, should they refinance?

d. If the new loan term is 15 years and the borrower plans to hold it until the end, should they refinance?