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Suppose that you are considering a loan in which you will borrow $245,000 using a 30-year loan. The loan has an annual interest rate of
Suppose that you are considering a loan in which you will borrow $245,000 using a 30-year loan. The loan has an annual interest rate of 6% with monthly payments and monthly compounding. Suppose also that the lender is charging you a 0.75% origination fee, you are paying 2.25 points in order to get the 6% interest rate, and the loan has $1,275 in third-party closing costs associated with it.
- What will the effective borrowing cost be for this loan if you make all of the scheduled payment?
- What will the lenders yield be for this loan if you make all of the scheduled payments?
- What will the effective borrowing cost be for this loan if you pay off the loan at the end of the 7th year?
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