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                     Incre mental Financing and Junior Mortgage
                                  Practice Proble ms

1.   You can borrow 95% of the purchase price at a rate of 6.75%. You can borrow 80%
     of the purchase price at 6.25%. What is the incremental cost of borrowing? Assume
     monthly payments for 30 years.




2. Mr. Davis is assuming a mortgage of $95,000 that has a contract rate of 5.75% and 15
   years until maturity. In addition, he is taking out a second mortgage for $30,000 at
   9%. The second mortgage also has a 15 year term. What is the combined borrowing
   cost? Payments occur monthly.




3. To purchase our home we have decided to choose an 80-10-10 mortgage with
   monthly payments. The 80% loan is for 30 years and has a contract rate of 6.75%.
   The 10% loan is for 15 years and has a contract rate of 9%. What is the lenders’
   combined yield? The purchase price is $150,000

				
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