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Real Estate Finance:
You are currently considering buying a new flat and have received the following offer from your bank:
Loan amount: NOK 6,000,000. Type of Loan: CPM with monthly payments at 5% interest per year. Term: 30 years. The NOK 6,000,000 loan currently finances 100% of the flat's market value. Annual price appreciation is expected to average 3% per year over the next 10 years.
1) What is the monthly payment that will fully amortize the loan over the 30 year period?
2) Given an annual price appreciation of 3 percent, what loan balance is consistent with owning 50% of your flat after 10 years?
3) Assuming that the annual price increase averages 4 percent (instead of 3 percent) per year over the next 10 years; which monthly payment is consistent with owning 50% of the flat after that period of time?
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