Test Ch. 11: Mortgage Calculation Worksheet

Which one of the following statements regarding fees is TRUE?

• When a fee is deducted from a loan advance, it is referred to as a bonus.

• A lender bonus is a fee charged by lenders as a means of increasing their yield on a loan.

• When a fee is added to the face value of a loan, it is referred to as a discount.

• A brokerage fee is charged by borrowers to mortgage brokers for the brokerage's services in arranging a mortgage loan.

What is the Total Cost of Credit for the borrower?

• $159,761.02

• $163,261.02

• $152,124.76

• $157,124.76

Which of the following is NOT included in the calculation of the total value paid by the borrower?

• 60 monthly payments

• Outstanding balance to be paid at end of term

• Face value of loan

• Brokerage fee

If the total funds received from the lender are $635,500 and the payout of an existing car loan is $6,000, what is the total value received by the borrower before subtracting the CMHC insurance fee?

• $641,500

• $645,000

• $635,500

• $651,500

What is the purpose of calculating the APR in the context of a mortgage loan?

• To determine the monthly payment amount

• To disclose the annual cost of borrowing as a percentage

• To calculate the total value received by the borrower

• To find the face value of the loan

Which one of the following is NOT a potential advantage to a mortgage loan assumption?

• May allow the vendor to avoid prohibitive prepayment penalties if the alternative is to pay off the loan prior to maturity

• May facilitate a sale to a purchaser who cannot obtain conventional financing

• Helps reduce market interest rates by freeing up additional money for institutional lenders to lend out

• May help avoid fees, such as legal, appraisal, or insurance, that would be required in originating a new loan

Calculate the cost of funds advanced under Alternative B, expressed as an effective annual rate. Round your final answer to two decimal places.

• 4.00%

• 5.15%

• 4.99%

• 4.33%

Which of the following is the correct market value of Tina's offer to buy Donald's house, rounded to the nearest dollar?

• 418,133

• 426,494

• 398,125

• 433,386

If today’s market interest rate for 1-year term mortgages was j2 = 4.55% and not j2 = 4.95%, what would happen to the market value of Sunny’s offer?

• It stays the same – the market interest rate does not affect the market value of the offer.

• It decreases.

• It increases.

• It is impossible to determine without more information.

Which of the following fees is typically paid by the borrower when obtaining a mortgage loan?

• Lender bonus

• Brokerage fee

• Prepayment penalty

• Discount fee