Property Purchase Price: $2,500,000
Appraised Market Value: $2,400,000
Property Net Income Estimate: $160,000 per year
Loan – to – Value Ratio: 70%
Interest Rate: 6.0%
Amortization Period: 25 years
Loan Term: 5 years
Required Debt Coverage Ratio: 1.25 (minimum)
Borrower’s Additional Closing Costs: $25,000
CALCULATE THE FOLLOWING:
1. Lender’s Effective Yield to maturity
2. Effective Borrowing Cost (EBC)
3. Total Interest paid during the term
4. Find the maximum loan amount using the maximum loan formula
5. Using the maximum loan, If the borrower pays 4 points for a reduced interest rate of 5.50%, what is the lender’s effective yield if the loan is held for the 5-year term?