- Budgeting
- Cash Management
- Consumer and Mortgage Loans
- Debt and Debt Reduction
- Time Value of Money 1: Present and Future Value
- Time Value of Money 2: Inflation, Real Returns, Annuities, and Amortized Loans
- Insurance 1: Basics
- Insurance 2: Life Insurance
- Insurance 3: Health, Long-term Care, and Disability Insurance
- Insurance 4: Auto, Homeowners, and Liability Insurance
- The Home Decision
- The Auto Decision
- Family 1: Money and Marriage
- Family 2: Teaching Children Financial Responsibility
- Family 3: Financing Children’s Education and Missions
- Investments A: Key Lessons of Investing
- Investments B: Key Lessons of Investing
Case Study #3
Data
Your spouse reminds you that you will likely only be in the home for six years, although the job looks wonderful. You compromise, and estimate that you will be in the home for twelve years. Review your choice between the two $200,000 loans, both which are amortized over thirty years, but which will be paid back in twelve years. Loan A is for the same 6.0 percent with no points or fees, and loan B is for 5.75 percent with a $1,500 loan fee and one point.
Calculations
Calculate the EIR for both loans, assuming prepayment after 12 years and annual payments.
Application
Which loan is more advantageous with prepayment using the EIR?
