A household is considering the following mortgage options. Discuss the advantages and disadvantages of each. The house is available for sale at $860,000.
a) 95% LTV loan, fully amortized over 20 years. The first five years are at a fixed rate of 2.10%, reverting to a fixed rate of 4.25% for the remaining term.
b) 90% LTV loan, fully amortized over 30 years at a fixed interest rate of 3.75%