Problem: Consider the case of Alpha ltd offering $75,000 home loan to the residents of Iowa, The term of loan is 30 years with 7.75% interest rate and expected monthly payments. Two points are charged on the loan and it is expected to be held for the period given. Please show steps how you get an answer and please be clear in your explanation.
Required:
- What is the effective borrowing cost which a homeowner should accept for the loan?
- What are the related closing costs associated with this loan?
- EBC rate and points have a relationship, explain and give your opinion whether the holding period affect EBC