Borrower is faced with choosing between two loans.

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A borrower is faced with choosing between two loans. Loan A is available for $75,000 at 10% MEY for 30 years, with 6 points included in the closing costs. Loan B would be made for the same amount, but for 11% MEY for 30 years, with 2 points included in the closing costs. Both loans would be fully amortizing.

If the loan is to be repaid after 15 years, which is the better choice? If the loan is repaid after 5 years, which is the better choice?

Reference no: EM131324158

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