A Minnesota homeowner borrowed $300,000 to purchase a residential property. Before defaulting, she made payments that reduced the principal balance to $195,000. Her lender proceeds with a non-judicial Chapter 580 foreclosure. The foreclosure sale is held on April 1. To redeem the property, the homeowner must pay the foreclosure sale price of $240,000, plus 5% simple annual interest. How much total interest will have accrued by the last day of her statutory redemption period?
Correct Answer
A) $6,000
Step 1 — Determine the applicable redemption period: The original principal was $300,000. The homeowner reduced it to $195,000, meaning she paid $105,000. One-third of $300,000 = $100,000. Since $105,000 > $100,000, she paid MORE than one-third of the original principal, so the standard 6-month redemption period applies (not the 12-month extended period). Step 2 — Calculate interest: Interest = Principal × Rate × Time = $240,000 × 5% × (6/12) = $240,000 × 0.05 × 0.5 = $6,000. The total interest accrued over the 6-month redemption period is $6,000.
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Related Topics & Key Terms
Key Terms:
Related Concepts
An adjustable-rate mortgage (ARM) has an interest rate that changes periodically based on market conditions, typically after an initial fixed-rate period. The rate adjustment is tied to a financial index plus a margin.
Closing costs are the fees and expenses paid by the buyer and seller at the closing of a real estate transaction, beyond the purchase price. They typically range from 2-5% of the purchase price.
A conventional loan is a mortgage that is not insured or guaranteed by a government agency such as the FHA, VA, or USDA. It is originated and funded by private lenders and may be conforming or non-conforming.
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