| Course | MT431 Real Estate Finance and Ethics |
|---|---|
| Unit | Unit 3 |
| Paper type | Loan comparison analysis |
| Length | About 1,140 words, 7 pages double-spaced |
| Format | APA 7 student paper |
| School | Purdue University Global |
| Program | BS in Business Administration |
| Updated | October 2026 |
Free sample paper for MT431 Unit 3
The Lowest APR Loses Over Five Years: An MT431 Unit 3 Loan Comparison Analysis of Three Quotes
[Student Name]
Purdue University Global
MT431: Real Estate Finance and Ethics
Unit 3 Loan Comparison Analysis
[Instructor Name]
[Date]
The couple and all three quotes are composite; costs at each horizon come from the script described, and the sources cited are real.
The Borrowers and the Question
Tomas and Elena Park, a composite couple, are borrowing $360,000 on a 30-year fixed loan to buy a home in Raleigh. Tomas's employer rotates managers every four to six years, so they expect to sell in about five. The question is not which loan has the lowest rate but which costs least over the time they will actually keep it.
The Three Quotes
Offer A carries a note rate of 6.375 percent with two discount points, $7,200, plus $1,650 in lender fees. Its monthly payment is $2,245.93 and its APR is 6.614 percent.
Offer B carries 6.75 percent with no points and the same $1,650 in fees. Its payment is $2,334.95 and its APR 6.795 percent.
Offer C carries 7.00 percent with a lender credit of $2,520, which more than covers the $1,650 in fees and leaves the couple $870 toward other closing costs. Its payment is $2,395.09 and its APR 6.976 percent, slightly below its note rate because of the credit.
Points are stated in dollars rather than as a percentage, because the break-even arithmetic needs dollars. Two points on $360,000 is $7,200.
Why APR Is Not the Answer
The APR spreads upfront charges across the full thirty-year term, as Regulation Z prescribes for the disclosure (Determination of annual percentage rate, 2025). That makes it a fair comparison for a borrower who keeps the loan for thirty years, and an unfair one for a borrower who keeps it for five. A borrower who sells early pays the points in full but collects only five years of the lower payment. Stanton and Wallace (1998) showed that the choice among points and rate combinations works as a signal of how long a borrower expects to keep the loan, which is why lenders price them as they do.
Cost at Five Horizons
The script computes each offer's cost at a horizon as cash paid upfront, plus all payments made, plus the balance still owed, minus the $360,000 borrowed. The balance is included because it must be repaid at sale; a loan that leaves more owed has cost more, even if the payments were the same.
At three years, Offer B costs $73,378, Offer C $73,570 and Offer A $76,514. B ranks first, C second, A last.
At five years, Offer B costs $119,700, Offer A $120,117 and Offer C $121,709. B still ranks first, but A has passed C.
At seven years, Offer A costs $162,323, Offer B $164,621 and Offer C $168,448. A now ranks first.
At ten years, A costs $222,593, B $228,928 and C $235,465. At thirty years, A costs $457,385, B $482,233 and C $501,362.
The rankings change twice: C falls behind A between years three and five, and A overtakes B between years five and seven.
The quote that wins at thirty years is the one this couple would lose money on if they move on schedule.
Break-Even Months
The simple break-even divides the extra upfront cost by the monthly payment saving. For Offer A against Offer B, $7,200 of points divided by $89.02 a month comes to 80.9 months, nearly seven years.
The balance-aware break-even also counts the faster principal repayment on the lower-rate loan. Each month, Offer A's balance falls slightly faster than B's, and that difference is the couple's money at sale. Counting it, A overtakes B in month 64, about five years and four months. The simple method overstates the wait by more than a year.
For Offer B against Offer C, B's higher upfront cost of $2,520 is recovered through payments $60.14 lower, at month 41.9 by the simple method and month 34 counting balances. For A against C, the figures are 65.2 and 52 months.
Lender Credits
Offer C's credit is the mirror of points: the lender pays the couple now in exchange for a higher rate later. Woodward and Hall (2012) found that many borrowers misjudge such tradeoffs and pay more than they would with careful shopping. For a couple sure to move within three years, C would cost only slightly more than B and would leave $2,520 more cash at closing. For a five-year stay it is the most expensive of the three.
What Each Offer Asks the Couple to Bet On
Each quote is, in effect, a wager on how long the couple will keep the loan. Offer A asks them to pay $7,200 now and bet that they will stay long enough for $89 a month to repay it; the bet pays only after month 64. Offer C pays them $2,520 now and asks them to bet that they will leave before the higher payment catches up; that bet pays only before month 34. Offer B makes no bet at all: nothing paid up front and nothing received.
For a couple whose stay depends on an employer's rotation schedule, the safest position is the one that loses least if they are wrong in either direction. If they move after three years, Offer B costs $192 more than C and $3,136 less than A. If they stay seven years, Offer B costs $2,298 more than A and $3,827 less than C. Offer B is never the worst of the three at any horizon from three years to ten.
Refinancing Changes the Horizon
The holding period that matters is the life of the loan, not the time in the house. If rates fall enough for the couple to refinance in a few years, the loan ends early even if they stay, and points paid on Offer A would be lost in the same way as if they had moved. Stanton and Wallace (1998) built this possibility into their analysis of points: a borrower who may refinance should value points as if the expected loan life were shorter than the expected stay. That argument also favors Offer B.
Recommendation
The couple should take Offer B, the no-point loan. At their expected five-year stay it is the cheapest of the three, by about $417 against A and $2,009 against C, and it requires no points, leaving $7,200 more in their reserves at closing. The margin over A is narrow, and it disappears if they stay past month 64. If Tomas's next rotation looks likely to come later than six years, Offer A becomes the better choice, and the couple should revisit the decision with that in mind.
The recommendation rests on the holding period, not the rate, and it states the one condition that would change it.
References
Determination of annual percentage rate, 12 C.F.R. ยง 1026.22 (2025).
Stanton, R., & Wallace, N. (1998). Mortgage choice: What's the point? Real Estate Economics, 26(2), 173-205. https://doi.org/10.1111/1540-6229.00743
Woodward, S. E., & Hall, R. E. (2012). Diagnosing consumer confusion and sub-optimal shopping effort: Theory and mortgage-market evidence. American Economic Review, 102(7), 3249-3276. https://doi.org/10.1257/aer.102.7.3249
What the MT431 Unit 3 assignment asks for
The third unit asks students to compare several mortgage quotes for a borrower and recommend one. Instructors expect each quote's rate, points in dollars, fees, payment and APR. The comparison should be built on the borrower's expected holding period, since APR assumes the loan is kept for its full term. Cost at several horizons, counting upfront cash, payments and the balance owed at that point, is the strongest method. Break-even months between pairs of quotes are usually required; the simple formula is accepted, and a balance-aware version earns more. Lender credits should be treated as the reverse of points. The recommendation should tie to the borrower's likely stay and name what would change it. Scripts or spreadsheets are fine when described.
Inside the MT431 Unit 3 example
The sample opens with the couple, their likely move and the question. The three quotes follow, with points converted to dollars. A section explains why APR misleads for a short stay, citing Regulation Z and Stanton and Wallace. Costs are reported at five horizons, with the two changes in ranking named, under a highlighted line on the thirty-year winner. Break-even months are computed both ways for each pair. Lender credits are treated as a bet in the other direction, with Woodward and Hall on how borrowers misjudge them. A section frames each offer as a wager on the loan's life, and another adds the chance of refinancing. The recommendation names Offer B and the one condition that would reverse it.
Where the points sit in the MT431 Unit 3 rubric
Loan comparisons are typically marked on whether the holding period drives the analysis. A comparison on note rate or APR alone answers a question the case did not ask. Rubrics often require points converted to dollars, since break-even arithmetic needs them. Credit goes to costing each quote at several horizons, including the balance owed at sale. A balance-aware break-even earns more than the simple formula alone. Treating lender credits correctly, as cash now for a higher rate, shows understanding. A recommendation tied to the borrower's stay, with a stated condition that would change it, scores higher than a single verdict. A quote table and a cost table by horizon make the reasoning easy to verify.
MT431 Unit 3 help from the desk
The most frequent weak comparison picks the lowest APR and stops. Another common error states points as a percentage and never converts them, so the break-even cannot be followed. Students often compare total payments over thirty years for a borrower who will move in five. Lender credits are frequently treated as free money. Some papers compute a break-even and never relate it to the borrower's plans. A verdict with no reversing condition is the last common gap. Before submitting, write down how long your borrowers expect to keep the loan and compute each quote's cost at exactly that point, including the balance they would pay off at sale. If your recommended quote is not the cheapest at that horizon, say why.
Get an MT431 Unit 3 example written to your instructions
Given the three Loan Estimates or quote sheets that Unit 3 supplies, and the rubric, a free first loan comparison can be drafted within 24-48h. It converts every point to dollars, prices each offer at the holding periods your borrower might realistically face, and states the length of stay that would flip the ranking. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.
More MT431 papers and BS in Business Administration samples
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- MT431 Unit 5: Refinance Break-even Analysis
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MT431 Unit 3 questions, answered
Why can the lowest APR be the wrong choice?
APR assumes the loan is held for its full term, so upfront points look cheap once spread across thirty years. Most borrowers sell or refinance well before that. When the expected stay is short, a higher-rate loan with little upfront cost often totals less. Comparing total cost at the realistic holding period gives a truer ranking than APR alone.
What is a lender credit?
A payment from the lender toward closing costs in exchange for a higher interest rate, sometimes described as negative points. It lowers the cash needed at closing and raises the monthly payment. For a borrower likely to move or refinance soon, a credit can be the cheapest option; over a long stay it usually costs more than it saves.
How should the MT431 comparison treat closing costs every lender charges?
Third-party costs such as title, appraisal and recording fees are often similar across lenders, so many comparisons set them aside and compare only lender charges and points. State which costs were excluded and why. If one lender's quote shifts third-party charges into its own fees, or the reverse, adjust so the offers are measured on the same basis.
Where can I find a free MT431 Unit 3 sample paper?
This page holds the full MT431 Unit 3 comparison, ranking three $360,000 quotes at five horizons for a couple expecting to move in five years.
When does the two-point quote in the MT431 Unit 3 sample start to win?
Counting balances as well as payments, at month 64, about five years and four months; the simple formula says 80.9 months.