IVIRIGAGE STRUCTURES HOMEWORK II 1. A 1/1 ARM for $60,000 with an initial interest rate of 10 percent is originated with month! pay. The interest rate on the ARM for year two is 12 percent. Determine the following: a. Year 1 - Initial loan payment b. Year 2-Adjusted loan payment c. Balance - End of Year 2 2. You want to purchase a house for $400,000. You can borrow up to 80% of the purchase price at 4%, monthly pay based on a 30 -year term. However, you must pay the bank two points (2%) upfront. a. What is the effective interest rate based on paying the points only? b. Assume you sell your house after 5 years, what was the effective interest rate on your loan? 3. You have applied to the bank for a $275,000 mortgage, monthly pay, 5.125%,30-year amortization. Assume the real estate taxes and insurance are $8,000 and $1,500 annually. Also assume you have loan payments for your car of $350 per month. a. What is the amount of annual income necessary to satisfy the Housing Expense Ratio? b. What is the amount of annual income necessary to satisfy the Total Debt Ratio? NOTE: Answers a. and b. will differ. 4. Assume a property with NOI of $2,000,000. Comparable properties are selling at cap rates of 6.25%. The bank will lend up to 75% of value. Assuming you obtain the loan, the terms are 4.75%, monthly pay, 25 year amortization. a. What is the amount of the loan the lender will commit? b. What is the Debt Service Coverage? c. What is the Debt Yield