Question
You have worked hard over the last three years to save up enough money for a down payment on your first home. After meeting with
You have worked hard over the last three years to save up enough money for a down payment on your first home. After meeting with your lender, you are faced with two loan options. Both loans are 30 year, fixed rate mortgages with payments of $1,800 per month. Origination fees will be 2% of the loan amount for either loan. Loan A has a contract interest rate of 3.0% with no points, while Loan B has a rate of 2.75% with 1.25 points.
- What is your EBC if you select Loan A? Enter your answer as a whole number with 2 decimal points (no percent sign).
- What is your EBC if you select Loan B? Enter your answer as a whole number with 2 decimal points (no percent sign).
- If you intend to stay in the house for 30 years, which loan should you choose?
- Loan A
- Loan B
- I would be indifferent between the two choices.
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Corporate Financial Management
Authors: Douglas R. Emery, John D. Finnerty, John D. Stowe
4th Edition
1935938002, 9781935938002
