Please see the table below. Please be guided by the second
column titled “Linkage†to understand the mathematics. The last row
highlighted in yellow is your answer. Figures in parenthesis, if
any, mean negative values. All financials are in $.
|
Parameter |
Linkage |
Option 1 |
Option 2 |
|
Property value |
A |
        180,000 |
     180,000 |
|
Loan proportion |
d |
80% |
95% |
|
Loan amount |
B
= A x d |
        144,000 |
     171,000 |
|
Points |
C |
1% |
2% |
|
Net borrowing |
D
= B x (1 - C) |
        142,560 |
     167,580 |
|
APR |
E |
8% |
9.25% |
|
Rate |
F
= E /12 |
0.006666667 |
0.0077083 |
|
Term |
G |
25 |
25 |
|
Nper |
H
= G x 12 |
300 |
300 |
|
PMT |
I
= PMT(F,H,-B) |
$1,111.42 |
$1,464.41 |
|
|
|
|
|
|
Incremental Analysis |
|
|
|
|
Net Borrowing |
J
= 167,580 - 142,560 |
          Â
25,020 |
|
|
PMT |
K
= 1,464.41 - 1,111.42 |
$353.00 |
|
|
Incremental rate |
L
= RATE(300,K,-J) |
1.3883% |
|
|
the incremental cost of borrowing the extra
money |
12 x L |
16.66% |
|
