Difference in the upfront cost of the two arrangement

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Reference no: EM131206415

You are offered two choices for financing your house, valued at $ 200,000 as follows:

A. a 90 percent LTV fixed rate 30-year mortgage at 6.00 percent. it will require private mortage at insurance for nine years ( until the loan is reduced to 78 percent of value) , effectively increasing the payment as if the loan were a 6.75 percent loan for nine years.

B. an 80 percent LTV first mortage , fixed rate , 30 years at 6.00 percent. (no mortage insurance is required because the loan is 80 percent of value.) a " piggyback" second mortgage for 10 percent of value of the house with an effective borrowing cost of 8.00 percent and a maturity of nin years is required too.

You expect for financing to be in place for seven years. if there is no difference in the upfront cost of the two arrangement which would be the better choice financially? why?

Reference no: EM131206415

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Difference in the upfront cost of the two arrangement : You are offered two choices for financing your house, valued at $ 200,000 as follows: A. a 90 percent LTV fixed rate 30-year mortgage at 6.00 percent. it will require private mortage at insurance for nine years, effectively increasing the payment as ..

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