24. you wish to purchase a property for $500,000. you intend to make a 20% down payment and you have the money to do so. you have two mortgage choices. you can finance the remaining 80% with a 30-year fixed rate mortgage at an interest rate of 5% with no closing costs (technically, the lender pays all closing costs at this rate). alternatively, you can choose a 30-year, 5/1 arm with an interest rate of 3%, and closing costs of $4000. the arm has an annual cap of 2% and a lifetime cap of 5%. assume a worst-case scenario (for you, the borrower) for interest rates throughout. what is the effective rate on the fixed rate mortgage if you keep the property 5 years?
