You are considering to buy a $250,000 property with a 80% LTV ratio and have two

Question

You are considering to buy a $250,000 property with a 80% LTV ratio and have two mortgage choices: a FRM or a FRM with an IO period.

You are considering to buy a $250,000 property with a 80% LTV ratio and have two mortgage choices: a FRM or a FRM with an IO period. The lender offers the following two loans Loan 1: 30 year FRM, fully amortizing monthly payments; 4% interest Loan 2: 30 year FRM with 4 year IO period, fully amortizing monthly payments; 4.15% interest Check all the true statements: If I want to save on interest payments, I would choose Loan 2 If want to minimize the payments in the first few years, I would choose Loan 2 If l'd like to pay off the loan sooner, l'd choose Loan 1 If I want my payments to remain the same for the duration of the loan, I would pick Loan 1

Explanation / Answer

true statements are 2nd and 4th.

if you want to minimise your payments in first few years, then choose loan 2 because you have to pay only interest in firsr few years.

if you want payments to remain constant, pick loan one.

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