A borrower is purchasing a property for $180,000 and can choose between two possible loan alternatives. The first is a 90% loan for 25 years at 9% interest, and the second is a 95% loan for 25 years at 9.25% interest.

Assuming the loan will be held to maturity, what is the incremental borrowing cost of the extra money?

Assuming the borrower's opportunity cost of capital is 7.80%, which loan should they take? Please show all of your work and calculations.