Posted by James Buster on June 14, 2002 at 00:58:56:
In Reply to: Rate/Yield comparison question posted by Brian Mac on June 13, 2002 at 14:17:26:
I believe the correct way is this:
Determine your expected holding period for this loan. That is, when do you expect to pay it off, either by refinancing or selling the property. Second, figure what sort of investment return you can get (stocks, CDs, whatever). Figure the present value of either N months of payments of 81.75/month earning X% or N months of a $7500 investment earning X%. You should add to each number the present value (*not* deduction amount) of the tax benefit of the *other* payment option. Choose the lowest one.