A borrower can obtain an 80%loan at a 5.5% interest rate with monthly payments amortized over 15 years. alternatively, he could obtain a 90% loan at a rate of 6.25%. The borrower plans to stay in the home for the entire loan term.
A) What is the incremental cost of borrowing the additional funds? B) How would the answer change if two additional points were charged on the 90% loan but the rate was 9%?