Question

You purchase a property with a Market Value of $520,000 in 2005 using 5-year Interest Only 90% Loan-to-Value financing. In 2010, the Market Value of the property drops to $460,000. You are considering refinancing. The Loan-to-Value you can get for refinancing is only 70%. How much Total Cash Out of Pocket would you need to have to go through with the refinancing and pay back the original loan Principal outstanding

Answer 1

Answer:

$155,660

Explanation:

Note: The table to question is attached below

==> Loan to Value 90% in 2005

==> Loan to Value 70% in 2010

Loan Amount in 2005 = $520,000*0.9 = $468,000

Loan Amount in 2010 = $460,000*0.7 = $322,000

Loan Amount owed = $468,000

Through Refinancing = $322,000

Total cash out of pocket = $322,000*3% + $468,000 - $322,000

Total cash out of pocket = $9,660 + $468,000 - $322,000

Total cash out of pocket = $155,660