Lucinda Lacy purchased a foreclosed house today for $105,500 by making a down pa
ID: 1219849 • Letter: L
Question
Lucinda Lacy purchased a foreclosed house today for $105,500 by making a down payment of 15% of the purchase price and paying closing costs of:
Loan origination fee 1.7% of purchase price
Appraisal fee $325
Survey fee 210
Attorney’s fee 420
Processing fee 300
Escrow fee 240
Other miscellaneous costs 620
Lucinda has a mortgage loan with an interest rate of 3.9% APR, compounded monthly for 30 years. Her taxes and insurance are $375 per month. Lucinda has an estimate for a contract for $8,500 firm, fixed price to remodel the house and this expense will be equally distributed over the period of her ownership. After remodeling, she estimates that she could sell the house for $135,000. Her selling expenses would be 7% sales commission plus $1000.
Determine manually (handwritten), by trial and error, Lucinda’s rate of return, if she owns the house for 6 months.
Include Cash Flow Diagrams
Explanation / Answer
This credit is an ordinary mortgage, monthly interest rate of 3.9% / 12, 30 * 12 period, the loan amount = 105,500 * (15%), then use Excel inside = PMT () function calculates the month down to him also $ 422.97,6 months to go further $ 2,537.81
plus his other miscellaneous fees (you miscalculated 197,335), he spent a total of 2,537.81 + 105,500 * 105,500 * 15% + 1.7% + 325 + 210 + 420 + 300 + 240 + 620 + 375 + 135 000 +8500 * 6 * 7% + 1000 = 43,471.31,
then he sold the house was 135,000, after deducting front fees, after deducting the early repayment of bank loans (ie, the remaining bank mortgage loans gold)
88,879.41 (with Excel inside = PV () function to calculate, assuming there is no prepayment fee, etc.),
his net profit: 2,649.28,
return on assets 2,649.28 / 43,471.31 = 6.09%,
annualized after the assets was: 12.19%
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.