Considering John buys a property for $105,000 plus use an 80 percent loan for $84,000, and a lender is indicating that a fully amortizing loan can be obtained for 30 years (360 months) at 8 percent interest, though with a loan fee of $3,500:

1. The lender disburses $80,500.
2. The APR for the borrower, assuming that the mortgage is paid off after 30 years (full term) is 8.45%.
3. The effective interest rate is 9.06% if John pays off the loan after five years.
4. Assuming that the lender imposes a prepayment penalty of 2 percent of the outstanding loan balance if the loan is repaid within eight years of closing, if John was to repay the loan after five years with the prepayment penalty, the effective interest rate will be 9.37%.

If the borrower, John, in the problem above wants to roll in or finance the loan fee of $3,500 into the loan amount which would make the loan $87,500. Assuming that the lender agrees to allow the loan fees to be included in the loan amount:

a. How much will the lender actually disburse? b. What is the APR for the borrower, assuming that the mortgage is paid off after 30 years (full term)? c. What is the effective interest rate if John pays off the loan after five years? d. Assuming the lender also imposes a prepayment penalty of 2 percent of the outstanding loan balance if the loan is repaid within eight years of closing, and John repays the loan after five years with the prepayment penalty, what is the effective interest rate?