Question
Assume an elderly person owns a $350,000 home that is free and clear of mortgage debt. A lender has agreed to a $350,000 reverse mortgage
Assume an elderly person owns a $350,000 home that is free and clear of mortgage debt. A lender has agreed to a $350,000 reverse mortgage with monthly payments. The loan term is 15 years. The annual interest rate is 6%. CALCULATE WITH BA II PLUS CALCULATOR
Questions [5 points for each question]
- What is the interest charged in the 1st month?
- If the elderly passes away in 5 years (60 months), what will be the loan balance?
- How much of the loan balance at the end of 60th month represents the interest portion?
- Suppose that there is $2,000 origination cost associated with the reverse mortgage and the elderly passes away in 5 years (60 months), what is the annual effective cost of the loan to the senior?
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Financial Modeling
Authors: Simon Benninga
4th Edition
0262027283, 9780262027281
