Financing alternative to obtaining first mortgage

Assignment Help Financial Management

Reference no: EM131497228

Bud is offering a house for sale for $180,000 with an assumable loan which was made 5 years ago for $140,000 at 8.75% over 30 years. Kelsey is interested in buying the property and can make $20,000 down payment. A second mortgage can be obtained for the balance at 12.5% for 25 years. What is the effective cost of the combined loans, if Kelsey would like to compare this financing alternative to obtaining a first mortgage for the full amount?

9.04%

9.39%

10.63%

11.27%

please show steps on how to calculate.

Reference no: EM131497228

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