Which alternative should the investor choose

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Reference no: EM131327219

An investor has owned a property for 15 years, the value of which is now to $200,000. The balance on the original mortgage is $100,000 and the monthly payments are $1,100 with 15 years remaining. He would like to obtain $50,000 in additional financing. A new first mortgage for $150,000 can be obtained at a 12.5 percent rate and a second mortgage for $50,000 at a 14 percent rate with a 15-year term.

Alternatively, a wraparound loan for $150,000 can be obtained at a 12 percent rate and a 15-year term. All loans are fully amortizing. Which alternative should the investor choose?

Reference no: EM131327219

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