|
Buydown [2923] |
Home Previous Next |
|
Janice wants a 6%, $100,000 loan for 10 years. The bank’s rate is 7%. The bank will give Janice a 6% loan if she pays the fair market value of the buydown for the first 7 years of the loan. What is the fair market value of the buydown? Use monthly tables.
$50.88 is the amount that the bank will lose each month if they give Janice her desired rate. To offset the loss, the bank charges Janice the present value of the monthly loss for the first 7 years of the loan ($3,371.16). | ||||||||||||||||||||||||||||||||||||||||||