Incremental interest cost of borrowing the extra money

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Reference no: EM13880899

A borrower is purchasing a property for $300,000 and can choose between two possible loan alternatives. The first is a 90% loan for 20 years at 6.0% interest and the second is an 80% loan for 20 years at 5.0% interest. Assume the loan will be held to maturity. What is the incremental interest cost of borrowing the extra money?

Loan 1 Loan 2

Loan to value ratio 90% 80%

Interest rate 6.0% 5.0%

Term 20 years 20 years

Please provide Explanation and how you did this using a financial calculator

Reference no: EM13880899

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