Loan origination fee-the loan value

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Reference no: EM131179770

Cost of a house is $112,000

Closing cost is 5% of the value of the house.

Financing Opportunities:

• 30 years mortgage at 5% per year with 10% down payment. Loan origination fee 1% of the loan value.

• Taking over the owner mortgage that has another 23 years to run on an initial value of $85,000, at 4% per year. In order to take over the mortgage, you have to pay a fee to the bank of $1,000 and the bank will issue a second mortgage at 8% to match the first mortgage. Origination fee and down payment are the same as for the first mortgage.

• The actual owner is willing to finance the second mortgage directly without any fee at a 10% for 10 years.

Evaluate each option (show work/steps) and choose the best option.

Reference no: EM131179770

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