John wants to buy a property for $105,000 and wants an 80% loan. The lender indicates that a fully amortizing loan can be obtained for 30 years at 12% MEY, with loan origination fees of $3,500. How much will the lender actually disburse?

1. [14 pts] At 8%, a $100,000 amortizing cpm is possible

John would like to buy property in the amount of $105,000. The lender will lend him an 80% loan. A fully amortizing loan is possible for 30 years, at 12% MEEY (Monthly Effective yield), and loan origination fees in the range of $3,000. First, determine how much John’s request is to the bank.

The price to be paid = Purchase Price x Loan (%) = $1055,000 x0.8 = $84,000

You will need to pay the loan fees.

Total Amount Requested + Fees = $(84,000 + 3.500) = $87.500

Knowing how much John requires from his lender, we can now calculate the closing amount.

Total Disbursed by Lender= (Total Amount Requested – Fees) ÷ 1-(MEY x # Of Years/12)(1)
= ($87,500 – 3 , 500) / 1- (0.12 *30/12 )
= $(84 , 000 / 0.88)
= $95 , 455 .45

These calculations show that the total amount disbursed at closing by the lender would be $95,455.45.(2). The amount includes both interest and principal payments, which can fluctuate depending on the prevailing market rate.(3). This calculation doesn’t include any extra expenses, fees or charges associated with getting a mortgage like title insurance premiums or appraisal costs. It is important for potential borrowers to thoroughly research their loans prior to committing any funds. They should also understand the full terms of each loan so that they know exactly how much they will have to repay once the mortgage term has ended.(4).

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