A borrower pays $4,500 in total interest for the first year on an interest-only loan. If the annual interest rate is 4.5%, what is the loan amount?
Correct Answer
A) $100,000
Step 1: For an interest-only loan, annual interest = Loan amount × Rate. Step 2: Loan amount = Annual interest ÷ Rate = $4,500 ÷ 0.045 = $100,000.
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Related Topics & Key Terms
Key Terms:
Related Concepts
IRV stands for Income, Rate, and Value. It represents the relationship between Net Operating Income (I), Capitalization Rate (R), and Property Value (V).
Loan qualification math involves calculating the debt-to-income ratios that lenders use to determine whether a borrower qualifies for a mortgage. The two primary ratios are the front-end (housing expense) ratio and the back-end (total debt) ratio.
Monthly interest is the portion of the total annual interest that is paid or accrued each month.
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