Question: 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

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.

A: [4] If the loan is to be repaid after 15 years, which is the better choice?

B: [2] If the loan is repaid after 5 years, which is the better choice?

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