Q12. A borrower holds a FRM mortgage at the interest rate of 7% with a current balance of $250,000 that will mature in 20 years. With the current low rates, he can obtain a new 20-year FRM loan at 6.125% without any fees or points. Should he refinance? What would be the monthly savings?

Q13. Smith Development Co. contracted a 30-year FRM loan with monthly amortization of $1.5 million at an interest rate of 13% five years ago. John Smith, a partner, just talked to a loan officer and learned that he can refinance the current balance on the loan at interest rate of 12% for a FRM amortized over 25 years. However, he also estimated the total refinancing cost to be $50,000. If Smith Development Co. holds the mortgage debt for 25 more years, would you recommend them to refinance? What if it holds for three years?