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CHAPTER SIX. RESIDENTIAL FINANCIAL ANALYSIS. Chapter Objectives. Calculate the incremental cost of borrowing Evaluate the effect of prepayment penalties, origination fees and other charges Calculate the market value of an outstanding mortgage loan
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CHAPTER SIX RESIDENTIAL FINANCIAL ANALYSIS
Chapter Objectives • Calculate the incremental cost of borrowing • Evaluate the effect of prepayment penalties, origination fees and other charges • Calculate the market value of an outstanding mortgage loan • Below market financing and effect on sales price
Calculator Solution • n= 25x12= 300 • PV= 10,000 • PMT= $172.47 • FV= 0 • i= 20.57% • Incremental cost of borrowing weighted average= 12.95%
Calculator Solution • n= 5x12 = 60 • PV= 10,000 • PMT= $172.47 • FV= 10,117.32 • i= 1.7360% or 20.83 (annual)
Calculator Solution • n= 25x12= 300 • PV= 8900 • PMT= $172.47 • FV= 0 • i= 1.9316 or $23.18 (annual)
Calculator Solution • n= 10x12= 120 • PV= $ 4105 • PMT= 60.87 • FV= 889 • i= 14.21
Calculator Solution • n= 5x12 = 60 • PV= -33.348 • PMT= $ 716.74 • FV= 0 • i= 10.50 • Is this attractive to the borrower?
Loan Balance: n= 15x12= 18 i= 10% /12= .8333 PMT= $ 772.02 FV= 0 PV= $ 71,842 Market Value Change i to 15% i= 15% /12 = 1.25 PV= $ 55,161 Calculator Solution
Calculator Solution • n= 15x12= 180 • PV= $ 5000 • PMT= $ 85.63 • i= 1.6177% or 19.41 (annual)
Wrap Around Loans • Used to obtain additional financing while keeping an existing loan in place
Calculator Solution • n= 15x12 = 180 • PV= $ 30,000 • PMT= $429.44 • FV= 0 • i= 15.46