How much is balloon payment

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1. Ann wants to buy an office building which costs $2,000,000. She obtains a 30 year partially amortizing fixed rate mortgage with 80% LTV, an annual interest rate of 4%, with monthly compounding and monthly payments. The payment on the loan is $6,000 per month. Ann has a balloon payment due 5 years after she gets the loan. If Ann pays the required monthly payment for 5 years, how much is her balloon payment?

2. Ann wants to buy an office building which costs $2,000,000. She obtains a 30 year fully amortizing fixed rate mortgage with 80% LTV, an annual interest rate of 4%, with monthly compounding and monthly payments. The mortgage has a 2% prepayment penalty if the borrower prepays in the first 5 years. Suppose Ann makes the required monthly payment for 3 years and prepays after her final monthly payment at the end of 3 years. What is the annual IRR on Ann’s mortgage?

Reference no: EM131932557

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