Question: A borrower is purchasing a property for $200,000 and can choose between two possible loan alternatives. The first is a 90% loan for 25 years

A borrower is purchasing a property for $200,000 and can choose between two possible loan alternatives. The first is a 90% loan for 25 years at 9% interest with 1 point and the
second is a 95% loan for 25 years at 9.25% interest and 1 point. Assuming the loan will be held to maturity, what is the incremental cost of borrowing the extra money?

Use the information in problem above, except assume that the loan will be repaid in 5 years.
What is the incremental cost of borrowing the extra money?

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