A mortgage banker is originating a level payment mortgage with the following terms:
|
Annual interest rate: |
9 percent |
|
Loan term: |
15 years |
|
Payment frequency: |
Monthly |
|
Loan amount: |
$160,000 |
|
Total up front financing costs (including discount points): |
$4,000 |
|
Discount points to lender: |
$2,000 |
a. Calculate the annual percentage rate (APR) for Truth in Lending purposes.
b. Calculate the lender’s yield with no prepayment.
c. Calculate the lender’s yield with prepayment is five years.
d. Calculate the effective borrowing costs with prepayment in five years.