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frutty [35]
3 years ago
14

Ann wants to buy a building. The annual NOI for the building will be $165,000. She wants to get a 20 year interest only fixed ra

te mortgage at an annual rate of 7.35% with annual compounding and annual payments to buy the building. The lender has a minimum Debt Service Coverage Ratio (DSCR) of 1.25. The lender also has a maximum LTV requirement of 70%. The asking price is $3,000,000.What is the largest mortgage the lender will give Ann based on both the DSCR and LTV requirements?(A) $132,000(B) $1,795,918.37(C) $2,100,000(D) $2,532,047.61
Business
1 answer:
Dovator [93]3 years ago
3 0

Answer:

correct option is (B) $1,795,918.37

Explanation:

given data

annual NOI = $165,000

time = 20 year

annual rate = 7.35 %

Debt Service Coverage Ratio (DSCR) = 1.25

maximum LTV requirement = 70%

price = $3,000,000

to find out

largest mortgage the lender will give Ann based on both the DSCR and LTV requirement

solution

first we get here PMT that is

DSCR = \frac{NOI}{PMT}    ..............1

1.25 = \frac{165000}{PMT}

PMT = $132000

and

PMT = annual rate × balance    ............2

$132000 = 7.35% × balance

balance = $1795918.367

so

LTV will be

LTV = 70% of $3,000,000

LTV = $2100000

so largest mortgage the lender will give Ann based on both the DSCR and LTV requirement is $1,795,918.37

so correct option is (B) $1,795,918.37

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