Tom has a choice in borrowing money for a new house valued at $150,000. He can obtain
Question:
Tom has a choice in borrowing money for a new house valued at $150,000. He can obtain an 80% LTV loan at 8% for 30 years with a 1% origination fee and one discount point, or he can obtain a 90% LTV loan at 8% for 30 years with a 1% origination fee, two discount points, and an up-front mortgage insurance premium of 0.5% of the loan amount plus an annual premium of 0.3% of the loan amount. Tom intends to sell the house in 8 years.
PART A- What is the net cash received by the borrower if he takes the 90% loan? a. $130,275
b. $130,950
c. $134,325
d. $138,450
E. none of the above
PART B- What is the incremental monthly payment?
a. $110.06
b. $140.06
c. $143.81
d. $158.06
e. none of the above
PART C- What is incremental loan balance? a. $11,536
b. $12,151
c. $13,653
d. $14,734
e. None of the above
PART D- What is the marginal cost of the additional funds? a. 14.14%
b. 12.60%
c. 10.08%
d. 9.93%
e. None of the above
Real Estate Finance and Investments
ISBN: 978-0073377339
14th edition
Authors: William Brueggeman, Jeffrey Fisher