Question

ot, to determine the regular payment amount, rounded to the nearest dollar. Consider the following pair of mortgage loan options for a $165,000 mortgage. Which mortgage loan has the larger total cost closing costs + the amount paid for points + total cost of interest)? By how much? Mortgage A: 30-year fixed at 12.25% with closing costs of $1300 and 1 point. Mortgage B: 30-year fixed at 10.5% with closing costs of $1300 and 2 points. Choose the correct answer below, and fill in the answer box to complete your choice. (Round to the nearest dollar as needed.) O A. Mortgage B has a larger total cost than mortgage A by $ OB. Mortgage A has a larger total cost than mortgage B by $ .

Answer 1

Total cost of Mortgage A=165000*(12.25%/12)/(1-1/(1+12.25%/12)^(12*30))*12*30+1300+165000*1%=$6,25,400.48

Total cost of Mortgage B=165000*(10.5%/12)/(1-1/(1+10.5%/12)^(12*30))*12*30+1300+165000*2%=$5,47,955.14

Mortgage A has a larger total cost by 625400.48-547955.14=$77,445.34