Refinancing

Mr. Antonio Rojas took a mortgage of $100,000 @ 30 years @ 8.5%. Today, five years later, the interest rate has dropped to 6.5%. Mr. Rojas wants you to advise him if he should refinance or not. If you refinance, there is a 2% penalty and a refinancing fee of $3,000. What do you advise?

Tip: Calculate the savings for refinancing, the cost for refinancing, how much the costs for refinancing "cost" you in percentage terms and what you advise Mr. Rojas to do.