You are considering purchasing a home and the purchase price is $$450,000.$ You may finance it

with one of the two options:

$80\%$ loan $5\mathrm{.}375\%,30$ year fixed $1\mathrm{.}5$ pts

$90\%$ loan $6\%,30$ year fixed upfront mortgage insurance premiums: $$8,366$

Question $1$:

What is the incremental cost on the additional $10\%$ of the purchase price if you borrow with the

$2^{nd}$ option?

Question $2$:

If you can obtain a $2^{nd}$ mortgage to go with option $180\%$ loan to make your total borrowing

amount $=90\%$ of purchase price. And this $2^{nd}$ mortgage costs $9\mathrm{.}7\%.$ Which loan option should

you choose?

Question $3$:

If you can earn $16\%$ annually$($after risk adjustment$)$ through investing in a multifamily project,

and you have enough cash to make $20\%$ downpayment if you choose $80\%$ loan. Which loan

should you choose? Will you answer change if you will relocate in four years?