You have been offered the following 2 fixed-rate mortgage loans to finance the acquisition of your...

You have been offered the following 2 fixed-rate mortgage loans to finance the acquisition of your first apartment building that costs $1.4 million. Explain which loan you should select considering you intend to sell the property in 5 years. Please show all relevant work.a.$1m 15-year FRM @ 7.8% that fully amortizes w/ 2 point in origination feesb.$1m 15-year FRM @ 8.4% that fully amortizes w/ 1 points in origination fees

Expert Solution

Option (a) has the lower effective cost of 8.345991% compared to 8.584137% of option (b)

Hence option (a) is selected

Calculations as below:

jeff jeffy answered 2 years ago

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