Question:

You purchase a house for $180,000 and your loan-to-value ratio is 70%.

A borrower is purchasing a property for $180,000 and can choose between two possible loan alternatives. The first is a 85% loan for 25 years at 9% interest and 1 point and the second is a 95% loan for 25 years at 9.25% interest and 1 point. Assume the loan will be held to maturity, what is the incremental cost of borrowing the extra money.

A		13.66%
B		13.50%
C		11.45%
D		12.01%

You are considering a 30-year adjustable rate mortgage where the interest rate is 5% compounded monthly for the first 4 years and then increases to 8% for the remaining 26 years. What would the new monthly payments be starting in Year 5?

A		Pmt 1st4 years = 676.40 and Pmt last 26 years = 899.67
B		Pmt all 30 years = 676.40
C		none of the selections
D		Pmt 1st26 years = 676.40 and Pmt last 4 years = 899.67