Tom purchased a house in September 2019. His 30-year fixed mortgage loan started with the principal of $200,000 and 3.5% APR. His mortgage lender recently contacted him to check if he would like to refinance his mortgage loan since the mortgage rate dropped significantly in this year. There is no significant change on Toms financials and credit score since he purchased the house, which may qualify him for 3% APR. The cost of refinancing including origination fee, appraisal, title, administration, etc. will be $7,000. With the interest rate drops, U.S. 7-year bond rate has dropped to 0.5% as well.

Toms friend Jerry is a financial planner and recently recommended a financial product with guaranteed annual return of 3%. Should Tom consider it in his refinancing decision? If he should, how many years he will have to keep the house to make the refinancing worthwhile?