You took a mortgage for $ 85,000 7 years ago @ 25 years @ 8.5%. Today i = 7.5%.

Should you refinance? There is a 2.5% penalty plus other closing and miscellaneous expenses for sum of $ 2,750.

STEP # 1: Compare the alternatives

STEP # 2: Calculate the sum of total expenses to refinance

STEP # 3: Determine the interest rate (i) that equates the expenses with the monthly fee for the remaining years

STEP # 4: Analysis, whether or not you should refinance and why.