An investor has owned a property for 15 years, the value of which is now to $200,000. The balance on the original mortgage is $100,000 and the monthly payments are $1,100 with 15 years remaining. He would like to obtain $50,000 in additional financing. A new first mortgage for $150,000 can be obtained at a 12.5 percent rate and a second mortgage for $50,000 at a 14 percent rate with a 15-year term. Alternatively, a wraparound loan for $150,000 can be obtained at a 12 percent rate and a 15-year term. All loans are fully amortizing. Which alternative should the investor choose?
Mortgages
A mortgage is a formal agreement in which a bank or other financial institution lends cash at interest in return for assuming the title to the debtor's property, on the condition that the obligation is paid in full.
Mortgage
The term "mortgage" is a type of loan that a borrower takes to maintain his house or any form of assets and he agrees to return the amount in a particular period of time to the lender usually in a series of regular equally monthly, quarterly, or half-yearly payments.
An investor has owned a property for 15 years, the value of which is now to $200,000. The balance on the original mortgage is $100,000 and the monthly payments are $1,100 with 15 years remaining. He would like to obtain $50,000 in additional financing. A new first mortgage for $150,000 can be obtained at a 12.5 percent rate and a second mortgage for $50,000 at a 14 percent rate with a 15-year term. Alternatively, a wraparound loan for $150,000 can be obtained at a 12 percent rate and a 15-year term. All loans are fully amortizing. Which alternative should the investor choose?
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