Question
A reverse annuity mortgage is made with a balance not to exceed $300,000 on a property now valued at $700,000. The loan calls for monthly
A reverse annuity mortgage is made with a balance not to exceed $300,000 on a property now valued at $700,000. The loan calls for monthly payments to be made to the borrower for 120 months at an interest rate of 11% MEY.
A What will the monthly payments be?
B What will the RAM balance be at the end of year 3?
Assume that the borrower must have monthly draws of $2,000 for the first 50 months of the loan. The remaining draws from months 51 to 120 must be determined so that the $300,000 maximum is not exceeded in month 120.
C What will the draws by the borrower be during months 51 to 120?
Suppose property experiences a 1% appreciation (MEY, starting today), and the borrower has a balance of $300,000 at year 10 (by receiving payments computed in a). No payments are made thereafter.
D How many years from loan closing will the loan balance begin to exceed the house value?
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