Problem
I. You are purchasing an investment property for $13,778,000. You are able to obtain a loan with a 75% loan-to-value ratio, a 5.95% interest rate, and 30-year amortization (compounded monthly). The loan requires you to pay a 0.5% loan origination fee.
i. What is the total dollar amount of the loan origination fee?
ii. What is the actual net disbursement?
iii. What is the effective borrowing cost for this loan?
II. You are purchasing an investment property for $229,000. You are able to obtain a loan with a 90% loan-to-value ratio, a 7.85% interest rate, and 15-year amortization (compounded monthly). The loan requires you to pay a 3% loan origination fee.
i. What is the total dollar amount of the loan origination fee?
ii. What is the actual net disbursement?
iii. What is the effective borrowing cost for this loan?
III. You are refinancing an investment property that has been appraised for $28,500,000. You are able to obtain a loan with a 70% loan-to-value ratio, a 3.95% interest rate, and 30-year amortization (compounded monthly). The loan requires you to pay 1% in loan fees and has a 5-year term.
i. What is the total dollar amount of the loan fees?
ii. What is the actual net disbursement?
iii. What is the effective borrowing cost for this loan considering the early payoff?
IV. You are refinancing an investment property that has been appraised for $3,990,000. You are able to obtain a loan with a 50% loan-to-value ratio, a 4.15% interest rate, and 25-year amortization (compounded monthly). The loan requires you to pay 1.5% in loan fees and has a 10-year term.
i. What is the total dollar amount of the loan fees?
ii. What is the actual net disbursement?
iii. What is the effective borrowing cost for this loan considering the early payoff?