|John wants to purchase a rental property for $105,000 and obtain an 80% loan for $84,000. A lender indicates that a fully amortizing loan is available for 30 years (360 months) at 8% interest; however, an up front origination fee of $4,000 will also be necessary (basically points).|
|a. How much (net) will the lender actually disberse?|
|b. What is the effective interest rate for the borrower, assuming that the mortgage is paid off after 30 years (full term) and including the fee?|
|c. If John pays off the loan after five years, what is the effective interest rate?|
d. Assume the lender also imposes a prepayment penalty of 2% on the outstanding loan balance if the loan is repaid within 8 years of closing. What is the effective interest yield to the lender if the loan is paid off in 5 years?