Question

In: Finance

A lender offers you a fixed-rate mortgage for $430,000 at 6.750% for 26 years with 4.75...

A lender offers you a fixed-rate mortgage for $430,000 at 6.750% for 26 years with 4.75 discount points due at closing (monthly payments and monthly compounding). If you prepay the loan at the end of year ten (10), what is the effective borrowing cost of the loan?

Solutions

Expert Solution

EIf paid off after 10 years, effective cost of borrowing= 7.4822%

Calculation as below:


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