Question: You're about to purchase a home and your mortgage broker offers you two options.
| Option 1 |
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Option 2 |
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| Mortage Amount |
$ 200,000 |
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|
Mortage Amount |
$ 200,000 |
| Interest rate |
7.0% |
|
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Interest rate |
7.5% |
| Closing Cost |
$ 4,500 |
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Closing Cost |
None |
Based on the information provided below, which option should you choose? (annual compounding is acceptable)
Additional Information (applicable to both options)
- You can invest surplus cash at 6%
- You're planning to refinance the mortgage at the end of the 5th year