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8. How do rising interest rates affect the size of real estate loans that lenders will advance?
Again, be specific.
Step by step
Solved in 2 steps
- What are some of the major differences between loans for residential and commercial real estate? What types of risk does the LENDER face in making commercial real estate loans? What potential benefits does the lender receive? What types of risk does the BORROWER (or OWNER) face when taking a commercial real estate loan? What is the potential benefit? What is meant by positive financial leverage? What about negative financial leverage? What drives the spread between 10-year commercial mortgage rates and the 10-year Treasury yield seen in Exhibit 16-2?Explain Incremental Borrowing Cost versus a Second Mortgage?Explain the reason why the wraparound lender should be willing to make the loan at a rate that is more attractive than a second mortgage?
- What is the break-even mortgage interest rate (BEIR) in the context of financial leverage? Would you ever expect an investor to pay a break-even interest rate when financing a property? Why or why not?What is the first step in calculating the lender's effective yield and calculating the borrower's effective cost of funds for loans? 1. Calculate the periodic loan payment based on the appraisal value. 2. Calculate the periodic loan payment based on the tax assessor's value. 3. Calculate the periodic payment based on the contract loan amount, nominal interest rate, and full amortization period. 4. All of the above.Which of the following is the principal risk faced by a home equity lender? a. Interest rates in the economy may fall b.Home prices in the area may decline c.Interest rates in the economy may rise d.Home prices in the area may rise
- Discuss how banks benefit when interest rates decrease?Which of the following statements regarding fixed-rate loans is true? Group of answer choices a. Fixed-rate loans are preferable if interest rates are expected to rise. b. The cost of fixed-rate loans increases with an increase in the market interest rate. c. The cost of fixed-rate loans decreases with a decrease in the market interest rate. d. Fixed-rate loans are preferable if interest rates are expected to fall. e. Fixed-rate loans have periodic adjustment dates, at which time the interest rate and monthly payment are adjusted as necessary.Inland development projects, why do lenders insist on loan repayment rates in excess of the sales revenue? What is the release price?
- Explain the addition to the interest rate, HELOC borrowers consider the issues?Discuss some of the most elementary terms used in fixed interest rate loans?Question 1 Assume you are an investor and you expect interest rate to rise in the near future, how would this affect your investment decision in the short and in the long term. Question 2 Assume yous are a potential borrower and you anticipate that interest rate will decline in the near future. How will it affect your borrowing decision in the short term as well as in the long term.
