1. A constant payment mortgage for $300,000 is to be made for 30 years at an MEY of 6%. All payments are monthly.
A. What are the payments if the loan is fully amortizing?
B. If the payments for the loan are 1,400, what is the balloon payment due at maturity? What type of loan is this?
C. What will the loan balance be after 7 years, if the loan is fully amortizing and payments are made according to schedule?
D. If the lender charges 2 points to close the loan, what is the “APR” of the loan if it is fully amortizing?
E. The lender charges 2 points in upfront fees and the loan is fully amortizing. If the borrower repays the loan after 7 years (having made only scheduled payments) and owes a prepayment penalty of 2% of outstanding principal, what is the effective cost of the loan?
F. The loan is fully amortizing, the lender charges 2 pointsupfront, and the borrower expects to terminate the loan after 7 years, and will owe a 2% penalty. As an alternative, the lender offers the same terms, but will reduce the contract rate by 25bps if the borrower prepays an additional 1 point. Which product should the borrower choose?