09 Jun Question Real Estate Review Assignment
Question
Real Estate Review Assignment
Problem 4 [20 points]
Please use the following information to answer questions below.
Adjusted Rate Mortgage
Mortgage Amount
$100,000
Term
6 years with annual payment
Adjustment Period
One Year Adjustable
Discount Points
0
Costs with Loan Origination
$8,000
Initial Contract Interest Rate
7.50%
Margin
2.25%
Caps
2.5% annual, 6% lifetime
Market Index
End of Year (EOY) 1: 8.6%; EOY 2: 9.5%; EOY 3: 10.5%; EOY 4: 7.25%
Questions [5 points for each question]
1. What are the interest rates in year 2 to year 5?
2. What is the remaining balance by the end of the 1st year?
3. What is the annual payment in the 2nd year?
4. What is the effective cost of this loan if you hold the loan for only one year?
Problem 5 [20 points]
You have the following two mortgage choices:
Fixed-Rate Mortgage
2/1 Interest-only ARM
Mortgage Amount
$100,000
$100,00
Term
3 years with annual PMT
3 years with annual PMT
The payments rises each year
Discounts Points
0
0
Costs with Loan Origination
$1,000
$1,000
Initial Contract Interest Rate
11.00%
10.00%
Margin
2.00%
Caps
no annual cap; 3% lifetime cap
Market Index
End of Year (EOY) 1: 7.0%; EOY 2: 4.5%
End of Year (EOY) 1: 7.0%; EOY 2: 4.5%
Calculate APR for each mortgage choice?
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