*PLEASE USE FINANCIAL CALCULATOR*

You are buying a $350,000 home and are deciding between two fixed rate mortgage options. The 80% LTV option has an interest rate of 8% over 30 years. The 90% LTV option has an interest rate of 8.5% over 30 years with 2 discount points.

What is the incremental borrowing cost when choosing the 90% LTV option over the 80% LTV option?

Why is the effective borrowing cost higher for the 90% LTV option?