Question
Jack and Jill have bought a house for $600,000, and are checking out two mortgage loans: - Loan 1: LTV = 80% fully amortizing 30-year
Jack and Jill have bought a house for $600,000, and are checking out two mortgage loans:
- Loan 1: LTV = 80% fully amortizing 30-year term with end of month payments. Interest Rate = 7.80%. This loan has 2 points to be paid upfront. It has 1% prepayment penalty if the loan is terminated sooner than 10 years.
- Loan 2: LTV = 90% fully amortizing 25-year term with end of month payments. Interest Rate = 8.40% This loan has 2 points to be paid upfront. It has 1% prepayment penalty if the loan is terminated sooner than 10 years. B. If Jack and Jill sell the house at the end of 9 years what is their incremental cost of borrowing over their nine years of home ownership?
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