You are reviewing loan offers for a 30-year fixed rate mortgage loan in the amount of $400,000. Option 1: mortgage broker has offered an interest rate of 3.5% with a 1% lender origination fee ($4,000), 1% broker fee ($4,000), and monthly payment of $1,796. Option 2: A mortgage banker has presented a competing offer with a higher interest rate of 3.875%, but with with no loan fees. Use effective borrowing cost (EBC) to determine the least cost option: To determine EBC for Option 1, assume you intend to sell your home after making payments for five years, at which time the remaining balance on the loan will be $358,753. For simplicity, you may assume there are no other 3rd party closing costs (other than the broker fee) associated with obtaining either loan, so that EBC for Option 2 is the same as the note rate, (i.e., 3.875%) and you don't have to calculate it. You determine that you should: Choose Option 1 because EBC for Option 1 is 3.96% which is greater than 3.875% EBC for Option 2 Choose Option 2 because