Which of the following is TRUE regarding the incremental cost of borrowing?
A)It should be less than the rate for a first mortgage
B)It should be compared to the cost of obtaining a second mortgage
C)It is used to calculate the APR for the loan
D)It is independent of the loan-to-value ratio

Question

Quizplus · Accepted Answer

The incremental cost of borrowing refers to the additional cost incurred when obtaining a second mortgage on a property. Therefore, it should be compared to the cost of obtaining a second mortgage (option B). Options A, C, and D are incorrect because the incremental cost of borrowing is not necessarily less than the rate for a first mortgage, it is not used to calculate the APR for the loan, and it is dependent on the loan-to-value ratio.

Which of the Following Is TRUE Regarding the Incremental Cost