Suppose that five years ago you borrowed $350,000 in the form of a 30-year loan with an interest rate of 5.25% per year with monthly payments and monthly compounding. You are trying to decide whether you should refinance into another 30-year loan with an interest rate of 4% per year with monthly payments and monthly compounding. Refinancing costs will be 2.5% of the amount borrowed. Use the current interest rate as your discount rate.

Calculate the NPV of refinancing if you expect to sell your house at the end of 4 years and, therefore, will pay off the new loan at the end of the 4th year.