Question 1

The effective cost of a wraparound loan should be comparable to the cost of a second mortgage with the same loan-to-value ratio.

Accepted Answer

A) True 
 B)False

Question 2

If interest rates decrease,the market value of a loan previously make will increase.

Accepted Answer

A) True 
 B)False

Question 3

A potential buyer is interested in purchasing a home that has an assumable below-market loan.The buyer determines that the financing premium associated with the below-market loan is worth $4,300.If similar houses sell for $100,000,the buyer should be willing to pay $104,300 or more for the property.

Accepted Answer

A) True 
 B)False

Question 4

Ms.Madison has an existing loan with payments of $782.34.The interest rate on the loan is 10.5% and the remaining loan term is 10 years.The current balance of the loan is $57,978.99.The home is now worth $120,000 and Ms.Madison would like to borrow an additional $30,000 through a wraparound loan which would increase the debt to 487,978.99.Terms of the wraparound loan are 12.25% interest with monthly payments for 10 years.What is the incremental cost of borrowing the extra $30,000 through a wraparound loan?

Accepted Answer

A)  15.47% 
B)  11.38% 
C)  12.96% 
D)  13.41%

Question 5

A borrower finds that the incremental cost of borrowing an extra $10,000 is 14%.A second loan can be obtained at 15% so the borrower would be better off by borrowing with the smaller loan and a second mortgage.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is FALSE concerning Buydown Loans:

Accepted Answer

A)  They are often used during periods of high inflation 
B)  They always lower the rate on the loan for the borrower for the entire loan term 
C)  Help borrowers qualify for a loan 
D)  They can be offered by home builders

Question 7

Which of the following is TRUE regarding the incremental Cost of Borrowing :

Accepted Answer

A)  It should be less than the rate for a first mortgage 
B)  It should be compared to the cost of obtaining a second mortgage 
C)  It is used to calculate the APR for the loan 
D)  It is independent of Loan-to-Value Ratio

Exam 6: Mortgages: Additional Concepts, Analysis, and Applications

The effective cost of a wraparound loan should be comparable to the cost of a second mortgage with the same loan-to-value ratio.

If interest rates decrease,the market value of a loan previously make will increase.

A borrower finds that the incremental cost of borrowing an extra $10,000 is 14%.A second loan can be obtained at 15% so the borrower would be better off by borrowing with the smaller loan and a second mortgage.

Which of the following is FALSE concerning Buydown Loans:

Which of the following is TRUE regarding the incremental Cost of Borrowing :