(Solved): Bud is offering a house for sale for $180,000 with an assumable loan which was made 5 years ago for ...

Bud is offering a house for sale for $\$180,000$ with an assumable loan which was made 5 years ago for $\$140,000$ at $8.75\%$ over 30 years. Kelsey is interested in buying the property and can make a $\$20,000$ down payment. She has the option to borrow a single constant payment mortgage of $\$160.000$ at $9.75\%$ for 25 years. Alternatively, she can assume Bud's existing mortgage and borrow a second mortgage for the balance amount at $12.5\%$ for 25 years. What is the effective cost of the combined loans? Which option is better for Kelsey? (Hint: Bud's mortgage balance plus the amount of second mortgage must be $\$160.000$ because her down payment is $\$20,000$ either way.) 10.63\%, assume the loan and take a second mortgage $10.63\%$ take the single loan option $9,39\%$, take the single loan option 9.39\%, assume the loan and take a second mortgage