Suraya wants to buy a property for $600,000 and wants 80 percent loan, lender (I&M Bank) indicates
Question:
Suraya wants to buy a property for $600,000 and wants 80 percent loan, lender (I&M Bank)
indicates that a fully amortizing loan can be obtained for 15 years at 13 percent interest per annum,
however, a loan origination fee of $7,500 will also be necessary for Suraya to obtain the loan.
i. How much will Suraya be expected to pay annually?
ii. If Suraya pays off the loan after five years, what is the effective interest rate?
iii. Assume the lender also imposes a prepayment penalty of 5 percent of the outstanding
loan balance if the loan is repaid within eight years of closing. If Suraya repays the loan
after five years with the prepayment penalty, what is the effective interest rate?
ISE Real Estate Finance And Investments
ISBN: 9781264892884
17th International Edition
Authors: Jeffrey Fisher William B. Brueggeman