Fordham University

Gabelli School of Business Administration

Real Estate Finance B$.$ McCarthy

FNBU $3447-$E$01$ Extra Credit

Sally Smith owns a multi$-$family residential apartment building in Jersey City, NJ$.$ On June $1,2016$ she placed an $$8,000,000$ loan on the property. The terms of the loan were as follows:

Term: $10$ Years

Interest Rate: $5-3/8\%$

Amortization: $30$ Years

There is no pre$-$payment penalty on the loan.

She would like to refinance the outstanding loan balance on May $1,2021.$ She was offered the following loan terms from two banks $($the maturity of each loan below is April $30,2031)$:

Bank A: They will refinance the balance of the existing loan at an interest rate of $3-1/4\%$ interest based on a $25$ year amortization schedule.

Bank B: They will refinance the balance of the existing loan at an interest rate of $3-3/4\%$ based on a $30$ year amortization schedule.

Answer the following $5$

Answer the following questions based upon the information above. Show all work.

$1.$ What is the outstanding loan balance on May $1,2021?$

$2.$ Which bank with have the lower ADS?

$3.$ What will the monthly payments be for Bank A$?$

$4.$ What is the loan constant for the original loan?

$5.$ Assume Ms$.$ Smith chose Bank A to refinance with, what would be the outstanding balance at maturity?