Using the concept of NPV, the underlying amortizing mortgage is financed @ 6% for 30 years, annual compounding, with no prepayment penalty. The loan was originated five years ago. At present, they have the opportunity to refinance this loan via another amortizing loan @ 4.5% for 25 years, annual compounding, with no prepayment penalty. The cost of originating this new loan is 2% of the new loan balance at the time of origination. You plan to remain in the property for another three years. should you refinance or not?
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