When purchasing a $100,000 house, a borrower is comparing two loan alternatives. The first loan is an 80% loan at 3% with monthly payments of $552.47 for 15 years. The second loan is 90% loan at 4% with monthly payments of $475.05 over 25 years. What is the incremental cost of borrowing the extra money assuming the loan will be held for the full term?

A borrower has secured a 30 year, $300,000 loan at 4%. 10 years later, the borrower has the opportunity to refinance with a 20 years mortgage at 3%. The mortgage balance after 10 years on the existing loan is $236,351.29. The new mortgage payment would be $1,310.80. A prepayment penalty of 2% must be paid on the balance of the existing loan, and origination fees are 1% of the new loan amount. Determine the effective cost of refinancing.