HW #2 Problem #3

3) Assume that you have purchased a home and can qualify for a $200,000.00 loan. You have narrowed your mortgage search to the following two options: Mortgage A Loan term: 30 years Annual interest rate: 6% Monthly payments Up front financing costs: $5,000.00 Discount points: 3 Mortgage HB Loan Term: 15 years Annual interest rate: 5.5% Monthly payments Up front financing costs: $7,000.00 Discount points: 3 Based on the effective borrowing cost, which loan would you choose? Now, calculate lender's yield for each (use only discount points as an expense). As a lender which loan would you prefer to underwrite