The loan will be a fixed-rate loan

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Jack is considering buying one of two houses. House A costs $ 150,000. It will require him to get a new loan for 80% of the purchase price; the closing costs on this loan will be $3,700. The loan will be a fixed-rate loan for 30 years at 5.0% interest.

House B is identical to house A (it's right next door), except for the price and the financing. The price is $155,000; also, it comes with a fully assumable fixed-rate loan for $127,000, at 3.875% interest. The loan is two years old, so it has 28 years left. The closing costs to assume this loan are $1,500. Tell Jack which house to buy, and why.

Reference no: EM13895811

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