Mary Smith wants to buy a property for $250,000 and obtains an 80 percent loan. This loan can be obtained for 25 years at 5.75 percent interest (monthly payments) with two points charged on the loan.
a. What dollar amount will the lender actually disburse?
b. What is the monthly payment?
c. How much interest is paid in year 6?
d. Assume the lender imposes a prepayment penalty of 1 percent of the outstanding loan balance if the loan is repaid within the first eight years. If Doe repays the loan after five years, what is the effective interest cost?