An investor would like to purchase a $2,000,000 new apartment house and has two financing options under consideration:
Option 1 includes a 70% loan to value mortgage for 15 years at 6.5% interat and 3% closing costs.
Option 2 includes an 80% loan to value mortgage for 15 years at 7.5% interest and 4% closing costs.
Compute the APR for each mortgage option and the incremental cost of borrowing the additional amount if option 2 is selected.