Question
A borrower is purchasing a property for $725,000 that she will sell at the end of 5 years. If the borrower only has enough cash
A borrower is purchasing a property for $725,000 that she will sell at the end of 5 years. If the borrower only has enough cash for a 15% down payment, which of the following financing strategies is the most cost-effective?
A. Obtain an 85% loan for 30 years at 3.5% and 1 point
B. Obtain a 70% LTV loan for 30 years at 2.875% and a second loan at 15% LTV for 30 years at a fixed rate of 7%
C. Obtain a 70% LTV loan for 30 years at 2.875% and a hybrid 5/1 ARM loan for 15% LTV for 30 years at an initial rate of 2.625%. The ARM features a margin of 2% and is pegged to the LIBOR rate
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