Question

John wants to buy a property for $108,750 and wants an 80 percent loan for $87,000. A lender indicates that a fully amortizing loan can be obtained for 30 years (360 months) at 6 percent interest; however, a loan fee of $3,800 will also be necessary for John to obtain the loan.

What is the APR for the borrower, assuming that the mortgage is paid off after 30 years (full term)?

Answer 1

The APR for the borrower, assuming that the mortgage is paid off after 30 years (full term), is approximately 6.11%.

Step-by-step explanation:

APR stands for Annual Percentage Rate, which is a measure of the total cost of borrowing, including both the interest rate and any additional fees or charges. To calculate the APR, we need to consider the loan amount, interest rate, loan term, and any upfront fees. In this case, the loan amount is $87,000, the loan fee is $3,800, and the loan term is 30 years.

First, we need to calculate the total repayment amount, which is the loan amount plus the loan fee. In this case, the total repayment amount is $87,000 + $3,800 = $90,800.

Next, we can use an online APR calculator or a mathematical formula to calculate the APR. Using an online APR calculator, the APR for this loan is approximately 6.11%.