RESIDENTIAL FINANCIAL ANALYSIS - PowerPoint PPT Presentation

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RESIDENTIAL FINANCIAL ANALYSIS

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Calculate the market value of an outstanding mortgage loan ... Calculator Solution. n= 5x12 = 60. PV= 10,000. PMT= $172.47. FV= 10,117.32 ... – PowerPoint PPT presentation

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Title: RESIDENTIAL FINANCIAL ANALYSIS


1
CHAPTER SIX
  • RESIDENTIAL FINANCIAL ANALYSIS

2
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

3
Incremental Borrowing Cost
4
Calculator Solution
  • n 25x12 300
  • PV 10,000
  • PMT 172.47
  • FV 0
  • i 20.57
  • Incremental cost of borrowing weighted average
    12.95

5
Early Repayment
6
Calculator Solution
  • n 5x12 60
  • PV 10,000
  • PMT 172.47
  • FV 10,117.32
  • i 1.7360 or 20.83 (annual)

7
Origination Fees
8
Calculator Solution
  • n 25x12 300
  • PV 8900
  • PMT 172.47
  • FV 0
  • i 1.9316 or 23.18 (annual)

9
Loan Refinancing and Early Payment
10
Loan Refinancing and Early Payment Continued
11
Loan Refinancing and Early Payment Continued
12
Calculator Solution
  • n 10x12 120
  • PV 4105
  • PMT 60.87
  • FV 889
  • i 14.21

13
Early Loan Repayment Lender Inducements
14
Calculator Solution
  • n 5x12 60
  • PV -33.348
  • PMT 716.74
  • FV 0
  • i 10.50
  • Is this attractive to the borrower?

15
Market Value of a Loan
16
Calculator Solution
  • 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

17
Effect of Below Market Financing
18
Calculator Solution
  • n 15x12 180
  • PV 5000
  • PMT 85.63
  • i 1.6177 or 19.41 (annual)

19
Wrap Around Loans
  • Used to obtain additional financing while keeping
    an existing loan in place

20
(No Transcript)
21
Calculator Solution
  • n 15x12 180
  • PV 30,000
  • PMT 429.44
  • FV 0
  • i 15.46
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