Consider a 6 percent, 30-year, $200,000 loan with fixed monthly payments. Assume up-front financing costs excluding discount points equal to $3,000. Compute the effective borrowing cost (EBC) for different combinations of discount points and number of years the loan remains outstanding, i.e., until it is prepaid. Variations of discount points to consider: 0, 0.5, 1, 1.5, 2 and 2.5 percent. Variations of number of years the loan remains outstanding to consider: 2, 4, 6, 8, 10 and 30 years.
