Bud is offering a house for sale for $200,000 with an assumable loan which was made 5 years ago for $160,000 at 10% over 25 years. Kelsey is interested in buying the property and can make a $20,000 down payment. A second mortgage can be obtained for the balance at 12.5% for 25 years. What is the effective cost of the combined loans, if Kelsey would like to compare this financing alternative to obtaining a first mortgage for the full amount?

Answer rating: 100% (QA)

To calculate the effective cost of the combined loans for Kelsey we need to compare it to obtaining a first mortgage for the full amount Lets break down the steps to find the effective cost Step 1 Det... View the full answer