1. Assume that you have purchased a home and can qualify for a $250,000 loan. You have narrowed your mortgage search to the following two options:

Mortgage A Loan term: 30 years Annual interest rate: 4.875 percent Monthly payments Up-front financing costs: $2,500 3rd Party closing costs: $1,750 Discount points: 1.0

Mortgage B Loan term: 15-years Annual interest rate: 4.375 percent Monthly payments Up-front financing costs: $3,200 3rd Party closing costs: $2,250 Discount points: 1.5

• Based on the effective borrowing cost, which loan would you choose? Mortgage A Mortgage B