- 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 #2
Data
You have decided on your dream house (well, at least your first house). In discussions with your mortgage broker, you have the choice between two $200,000 loans, both of which are amortized over thirty years. Loan A is for 6.0 percent with no points or loan origination fee, and loan B is for 5.75 percent with a $1,500 loan fees and one point.
Calculations
Assuming you plan to stay in the house for 30 years, which loan is more advantageous based on the Effective Interest Rate (EIR) and assuming annual payments?
Loan A $200,000 6.0% no points, no fees, 30 years
Loan B $200,000 5.75% 1 point, $1,500 fees, 30 years
