Consider the following pair of mortgage loan options for a $175,000 mortgage. Wh
ID: 2649021 • Letter: C
Question
Consider the following pair of mortgage loan options for a $175,000 mortgage. Which mortgage loan has the larger total cost (closing costs ? the amount paid for points ? total cost of interest)? By how much? Mortgage A: 15-year fixed at 615% with closing costs of $1500 and 1 point. Mortgage B: 15-year fixed at 515% with closing costs of $1500 and 4 points. Choose the correct answer below, and fill in the answer box to complete yow choice A. Mortgage B has a larger total cost than mortgage A by $. B. Mortgage A has a larger total cost than mortgage B by $.Explanation / Answer
Mortgage A
Closing Cost=$1500
Interest=175000*6.25%*15=164062.50
Amount for points=175000*1%=1750
Total Cost=164062.50+1500+1750=1,80,815.50
Mortgage B
Closing Cost=$ 1500
Interest=175000*5.25%*15Years=1,37,812.50
amount paid for points=175000*4%=7000
Total Cost=137812.50+1500+7000=146312.5
Correct Answer is B.
Mortgage A has the larger cost than mortgage B by $ 34,503 (180815.50-146312.50)