You have saved $150,000 to invest in a $870,000 property. He can obtain either a $720,000 loan at 6.5 percent for 20 years or a $540,000 loan at 6 percent for 20 years and a second mortgage of $180,000 at 10.5 percent for 20 years.

a. Which alternative should the borrower choose, assuming he will be in the house for the full loan term?

b. Would your answer change if the borrower plans to be in the home only five years?