Smith is looking for a fully amortizing 30 year Fixed Rate Mortgage with monthly payments for $450,000.

Mortgage A has a 4.25% interest rate and requires Smith to pay 1.5 points upfront.

Mortgage B has a 5% interest rate and requires Smith to pay zero fees upfront.

Assuming Smith makes payments for 30 years, which mortgage has the lowest cost of borrowing (i.e. lowest Annualized IRR)? Type 1 for A, type 2 for B.