Ben Thenking wants to borrow $300,000 to buy a house. He plans to live there for exactly 5 years before selling the house, repaying the lender the balance and moving. Ben is considering a 30 year fully amortizing fixed rate mortgage with monthly payments. The banker shows Ben three loan options: (1) A loan with a 5% annual interest rate which requires Ben to pay 2 points up front, (2) the same terms as (1), but the loan principal is increased so Ben can borrow the points, or (3) no points, 5.25% annual interest 30 year fully amortizing fixed rate mortgage with monthly payments.

(A) What is the monthly mortgage loan payment for each of the 3 options?

(B) Which of the 3 options above will result in Ben paying the least total payments for the 5 year period and what is the total $ amount of all the payments made over the 5 years for the option selected? Note that the total sum of all payments over the 5 years, includes: (1) the monthly mortgage payments, (2) any points paid up front, and (3) the repayment of the remaining unamortized principal loan balance at the end of year 5.

(C) What is the effective interest rate for option #1, assuming the loan remains outstanding for the entire 30 years?