Question

Ed wants to buy a property for $320,000 and wants a CPM loan for 80%. A lender indicates the loan can be obtained for 30 years at 5.5% with an origination loan fee of $1,200 and 2 points.

Assume the lender also imposes a prepayment penalty of 2% of the outstanding loan if the loan is repaid in the first 10 years of closing. If Ed repays the loan after five years, what is the effective interest cost?

5.50%

6.09%

5.75%

5.83%

6.42%

Answer 1