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6. Consider the two loan financing alternatives: Home Value = $180,000 Two Financing Alternatives #1: 70% Loan to Value (LTV), 7.5% Interest Rate, 30 Years
6. Consider the two loan financing alternatives:
Home Value = $180,000
- Two Financing Alternatives
- #1: 70% Loan to Value (LTV), 7.5% Interest Rate, 30 Years
- #2: 80% Loan to Value (LTV), 8% Interest Rate, 30 Years
- What are the monthly payments with alternatives 1 and 2?
- What is the incremental borrowing cost for the additional amount borrowed through alternative 2 (i.e., the loan with the higher LTV)?
- Suppose you expect to relocate after 11 years, but you do not have the option of a second mortgage. What is the incremental borrowing cost for loan 2?
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