What is the effective cost of loan

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A Homeowner purchases as a property for $900,000. He finances the purchase with an 80% LTV, 30-year fully amortizing GPM carrying a 7% interest rate. A 20% rate of graduation will be applied to a monthly payments beginning year 2 and the beggining of year 3, only (payments in year 3 and 4 and on are the same). The homeowner will sell the property after 8 years and does not curtail the loan ever. Up front fees amount to 4% of the loan amount, plus $4000 which were financed. A prepayment penalty of 3% applies.

What is the effective cost of the loan?

Reference no: EM132062386

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