John wants to buy a property for $122,500 and wants an 80 percent loan for $98,000. A lender indicates that a fully amor
Posted: Fri Jul 01, 2022 7:46 am
John wants to buy a property for $122,500 and wants an 80percent loan for $98,000. A lender indicates that a fullyamortizing loan can be obtained for 30 years (360 months) at 9percent interest; however, a loan fee of $4,900 will also benecessary for John to obtain the loan.
Required:
a. How much will the lender actuallydisburse?
b. What is the APR for the borrower,assuming that the mortgage is paid off after 30 years (fullterm)?
c. If John pays off the loan after fiveyears, what is the effective interest rate?
d. Assume the lender also imposes aprepayment penalty of 2 percent of the outstanding loan balance ifthe loan is repaid within eight years of closing. If John repaysthe loan after five years with the prepayment penalty, what is theeffective interest rate?
Required:
a. How much will the lender actuallydisburse?
b. What is the APR for the borrower,assuming that the mortgage is paid off after 30 years (fullterm)?
c. If John pays off the loan after fiveyears, what is the effective interest rate?
d. Assume the lender also imposes aprepayment penalty of 2 percent of the outstanding loan balance ifthe loan is repaid within eight years of closing. If John repaysthe loan after five years with the prepayment penalty, what is theeffective interest rate?