A potential borrower wishes to buy a $520,000 home using a LTV of 80%. For the mortgage loan, she can obtain a single jumbo loan at 9.80% for 30 years [origination fee: 4.00 points, prepayment penalty: 3.50%]. Alternatively, she can obtain a first mortgage at 8% for 30 years [origination fee: 3.00 points, prepayment penalty: 3.50%] for 68% of the total mortgage loan need and a second mortgage for the remaining mortgage loan need at 13% for 30 years [origination fee: 2.00 points, prepayment penalty: 3.50%] for the remaining amount of loan need. The borrower plans to be in the home for 10 years. Should the borrower go for the single jumbo mortgage or the combo of two (first and second) mortgages?

Answer rating: 100% (QA)

Since the interest for option 1 is lower than the opti... View the full answer