Question
Consider two physically identical properties A and B. Property A's current asking price is $570,000 and Property B's asking price is $522,497. Property A's current
Consider two physically identical properties A and B. Property A's current asking price is $570,000 and Property B's asking price is $522,497. Property A's current owner has a 25-year remaining maturity assumable mortgage of $473,100 at a fixed mortgage rate of 11.40%. Property B's current owner has a 25 year remaining maturity non-assumable mortgage of $473,100 at a fixed mortgage rate. The current market mortgage rate for 25-year maturity conventional (not assumable) mortgage is 13.15%. In either Case (A or B), the buyer would have the same amount $473,100 of 25-year fixed rate mortgage financing. The Buyer's Alternative Investment Return is 14.45%.
a) what is the cash equivalent value of property A's assumable mortgage?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started