What is the incremental cost of borrowing the additional

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Reference no: EM131978964

A borrower has the following two financing options: 80% LTV fully amortizing CPM for 25 years at 8% or 90% LTV CPM loan at 9% with similar terms. The borrower is not planning to prepay the loan.

a. Compute the incremental cost of borrowing the additional 10% (any property value should works).

b. What is the incremental cost of borrowing the additional 10% if the lender charges 2 discount points additional on the 90% loan?

c. Redo (b) assuming the borrower prepays the loan after 5 years.

Reference no: EM131978964

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