you purchase a self storage facility for 1,800,000. you expect to hold this investment property for 12 years. a lender is offering you two different mortgage options.

Option A is 6.5% LTV, 6% interest rate, 25 year term with monthly payments, three discount points and a 2% prepayment penalty on the outstanding balance.

Option B is 60% loan to value ratio 6.75% interest rate, 20 year term with monthly payments. Calculate the lenders effective yield on both mortgages. Which mortgage should you, the borrower, select?