Additional Concepts, Analysis and applications Comparison of two loans with different terms Incremental Borrowing costs Example Assume a borrower is purchasing a property for USD 100,000 and faces two possible loan alternatives. A lender is willing to make an 80% first mortgage loan, or USD 80,000, for 25 years at 12% interest. The same lender is willing to lend 90% , or USD 90,000, for 25 years at 13%. Both loans will have a fixed interest rates and CPM. How should the borrower compare these two alternatives