trying to sent emails on localhost issue (SMTP Error: Could not authenticate.)

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PHP

I´m trying to test my emails on localhost, and I´m getting this error: SMTP Error: Could not authenticate.
Somebody there know how to send emails on localhost? Can see if I´m doing something wrong? Because I guess everything is correct and I´m not understanding what is happening to have this error.

I did this configuration in php.ini ony my xampp folder:

mail function]
; XAMPP: Comment out this if you want to work with an SMTP Server like Mercury
; SMTP = localhost
 smtp_port = 25

; For Win32 only.
; http://php.net/sendmail-from
sendmail_from = myemail@hotmail.com

Im using php mailer class to send the email:

<?php
    define('MAILUSER','myemail@hotmail.com');
    define('MAILPASS','');
    define('MAILPORT','587');
    define('MAILHOST','smtp.live.com');
    define('SITENAME', 'Site Name');

        function sendMail($subject,$message,$sender,$senderName,$destination,$destinationName, $reply = NULL, $replyNome = NULL){

            require_once('mail/class.phpmailer.php');

            $mail = new PHPMailer();
            $mail->IsSMTP();
            $mail->SMTPAuth = true;
            $mail->IsHTML(true);

            $mail->Host = MAILHOST;
            $mail->Port = MAILPORT;
            $mail->Username = MAILUSER;
            $mail->Password = MAILPASS;

            $mail->From = utf8_decode($sender);
            $mail->FromName = utf8_decode($senderName);

            if($reply != NULL){
                $mail->AddReplyTo(utf8_decode($reply),utf8_decode($replyNome));
            }

            $mail->Subject = utf8_decode($assunto);
            $mail->Body = utf8_decode($mensagem);
            $mail->AddAddress(utf8_decode($destination),utf8_decode($destinationName));

            if($mail->Send()){
                return true;
            }else{
                return false;
            }
        }
    ?>