You have had a 30yr FA FRM at 10% for 5 years. The original principal was 1,000,000. You are considering a cash-out refi into a 15-year mortgage at 7.5%. The old mortgage has a prepay penalty of 3% if payoff occurs before year 8. The new mortgage has fees of 4%, and no prepay penalty. The additional cash is for a $60,000 car, and can be borrowed at 9% over 10 years, with upfront fees of 1%.

Assume all fees will be financed, and that under either scenario you will be moving 10 years from now.

What is the NPV of refinancing?

A borrower is faced with choosing between two loans. Loan A is available for $75,000 at 10% MEY for 30 years, with 6 points included in the closing costs. Loan B would be made for the same amount, but for 11% MEY for 30 years, with 2 points included in the closing costs. Both loans would be fully amortizing.

If the loan is to be repaid after 15 years, which is the better choice?

If the loan is repaid after 5 years, which is the better choice?

Consider a 30 year, FA graduated payment mortgage for $500,000 at 6%, with 5 payment increases of 20%. If fees are 2 points plus $8,000, what is the regulation-Z required APR?

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?

C 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. What will the draws by the borrower be during months 51 to 120?

D 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. How many years from loan closing will the loan balance begin to exceed the house value?