a) A borrower secured a $600,000 loan for a term of 15 years. The loan is partially amortising with a balloon payment of $150,000 at maturity. The loan requires monthly payments at an annual rate of 6.34%. Calculate the pay rate on this loan. 

b) A homeowner obtained a fully amortising constant payment loan 4 years ago for $567,000 at an annual interest rate of 6.12% for a 24-year term and monthly payments. Since then, interest rates fell and a new loan can be secured at an annual rate of 5.32% for a term of 20 years. Suppose there is a 1.50% break fee on the existing loan. The break fee will be capitalised into the new loan (i.e. the new loan amount equals the loan amount required for refinancing and the break fee). What is the effective cost of refinancing, if the new loan is repaid after 5 years? 

c) You have secured $1,210,000 in debt financing to purchase a rental property. The loan will have a term of 30 years and will require monthly payments at an annual interest rate of 3.89%. The lender has agreed for the loan to be interest-only during the first 5 years. After the interest-only period, the loan will convert to a fully amortising loan. If the loan is held to maturity, how much total interest would the lender receive during this term?

Answer rating: 100% (QA)

a To calculate the pay rate on the loan we need to determine the monthly payment amount Loan amount 600000 Loan term 15 years 15 12 180 months Balloon payment 150000 Annual interest rate 634 To calcul... View the full answer