An investor has owned a property for $15$ years, the value of which is now $$206,000.$ The balance on the original mortgage is $$100,000$ and the monthly payments are $$1,100$ with $15$ years remaining. The investor would like to obtain $$61,000$ in additional financing. A new first mortgage for $$145,000$ can be obtained at a $12\mathrm{.}5$ percent rate. A new second mortgage for $$61,000$ can be obtained at a $14$ percent rate with a $15-$year term. Alternatively, a wraparound loan for $$145,000$ can be obtained at a $12$ percent rate and a $15-$year term. All loans are fully amortizing.

Required:

What is the incremental return on the wraparound loan?

What is the effective cost of the combination of the existing mortgage and the new second mortgage?

Which alternative is better for the borrower?