A mortgage loan in the amount of $100,000 is made at 12 percent interest for 20 years. Payments are to be monthly.
1) Assume that the lender charges 3 points to close the loan. What would the APR be if it is a negative amortizing loan and the loan balance will be $150,000 at the end of year 20?
Note: Mortgage points, also known as discount points, arefees paid directly to the lender at closing in exchange for a reduced interest rate. This is also called “buying down the rate,” which can lower your monthly mortgage payments. One point costs 1 percent of your mortgage amount (or $1,000 for every $100,000).