Jack got a $95k 30 year FA-FRM 5 years ago at an 11% rate, in order to buy his house. When Jack got that mortgage, he was given a rate of 11%. His credit score improved and now he can get a 25 year FA-FRM at a rate of 10%. In order to get the new mortgage, he will have to pay 3 points in fees and $2,000 in closing costs.

a. Given that Jack plans to own the house for the remaining mortgage term, evaluate if he should refinance.

(b) If Jack plans to own the house for only five more years, should he refinance?

*** For both parts (a) and (b) assume that Jack borrows only an amount equal to the outstanding balance of the mortgage.