ADMS 2610 Lecture Notes - Lecture 10: Second Mortgage, Mortgage Loan

59 views7 pages

limeswan698

7 Feb 2018

School

York University

Department

Administrative Studies

Course

ADMS 2610

Professor

Robert

For unlimited access to Class Notes, a Class+ subscription is required.

Document Summary

A mortgage is simply an agreement whereby a debt or loan is secured by land. The borrower is the land owner and is called the mortgagor. The person or legal entity that lends the money and takes security of borrower"s land is called the mortgagee. The lender can be a bank, a finance company or a private individual/person. Where a person borrows money by way of mortgage as security, we say that the borrower gives the mortgage to the lender as security for the mortgage loan. For example, a, who owns land, wants to borrow $ 200,000. 00. A will approach a bank or other lender who will first look at the value of a"s property to see whether it is worth at least $ 200,000. 00 so that the land can become the security for the loan. These days, the lender will also look at a"s assets and income to determine whether a can repay the loan.

Related Questions

Golding Pty Ltd operates a gold valuation business in Ballarat. It has three directors: George, Bess and Xian. George had signed a mortgage and guarantee in favour of Big Bank Ltd on behalf of Golding Pty Ltd. The guarantee secured a personal loan made by Big Bank Ltd to George. The mortgage was over Golding Pty Ltdâs land in Mt Clear. Both documents were signed by George and appeared to have been signed by Bess. However, George had forged Bessâs signatures on the documents and Bess was completely unaware of the transaction.

Golding Pty Ltdâs constitution provided that such loan agreements could only be executed if authorized by directorsâ resolution. No such resolution had occurred, and indeed neither Bess nor Xian knew about the personal loan, the mortgage or the guarantee.

Big Bank Ltd had not undertaken searches to determine whether George and Bess were directors of Golding Pty Ltd prior to accepting the mortgage and guarantee as security and making the loan to George.

George has failed to repay the loan and has now left Australia. Big Bank Ltd is attempting to enforce the guarantee and mortgage against Golding Pty Ltd.

Required:

Discuss whether Big Bank Ltd can enforce the guarantee and mortgage (contracts) against Golding Pty Ltd

John took a mortgage loan 5 years ago for $120,000 at 7% interest for 15 years, to be paid in monthly payments. Now, a lender is offering him a new mortgage loan at 5% for 10 years. The new loan amount is $92,895, the outstanding loan balance of the existing loan. Suppose that a prepayment penalty of 3% must be paid if John refinances the existing loan. Moreover, the lender who is making the new loan requires an origination fee of $3,000. John plans to hold the property for 10 years. Note: John has to pay the refinancing fees (i.e., the origination fee and the prepayment penalty) out of his pocket.

(a) What is the total financing cost (not include the loan amount itself) if John decides to refinance the old loan?

(b) What is the monthly savings that John could realize by refinancing?

(c) Given the information provided here, should John refinance? Please support your answer by calculating the effective interest rate of the new loan.

(d) Now suppose that Johnâs current income is low. The new lender allows him to pay a monthly payment of $300 for the new loan (i.e., the actual monthly payment to the lender is only $300, while the loan interest rate is 5%). In this situation, negative amortization occurs. What will be the accrued interest or the amount of increased loan balance for the loan three years later from now?

(e) Assume that John has to borrow two loans in order to refinance. That is, he has to borrow a new mortgage ($70,000) at 5% for 10 years (i.e., the loan maturity and the amortization period are the same, 10 years) and another mortgage ($22,895) at 9% for 5 years (the loan maturity and the amortization period are the same, 5 years). In this case, with the same origination fee of $3,000 (i.e., a total of $3,000 for the two loans) and the prepayment penalty of 3%, should John go ahead with the refinancing plan? Why?

(I primarily need assistance with Sections D and E as I believe I have A-C correct)

amethystalpaca937

Instructions: Review and respond to at least two of your classmates' posts by sharing any ideas you may have about how households and businesses can protect themselves against inflation.

Please help with a response to the following:

The government tries to restrain inflation because it causes an unintended and undesirable redistribution of income and wealth (Amacher, Pate 2012). That is when a lender who is in the driver's seat when providing a loan to a person can charge a low-interest rate to entice people to borrow money at that low rate. Now if the Feds were to raise the interest rate even a quarter of a percent this could turn the tables from the lender over to the borrower. In the first scenario, the Lender will make a small profit over the long term with the low-interest rates. If the nation's interest rate increases, the value of the dollar goes down and the Lender ends up making less back than they loaned. This causes the redistribution of the income to favor the borrower.

Once inflation starts to happen it is a trickle-down effect on the consumer in the long run. Eventually, the consumer will start to pay inflated rates in some way through the goods and services they purchase. Those that are on fixed incomes will be adversely affected because as their income does not increase but the cost of goods does, they will have to find ways to cut their spending in order to make ends meet. This could be done without eating out as often, buying cheaper and fewer quality foods, or shopping at lower quality stores just to save the extra dollars that inflation has cost them. People who are on fixed incomes have to become more creative in order to still enjoy some qualities in life when times get tight.

viridianfrog614

ADMS 2610 Lecture Notes - Lecture 10: Second Mortgage, Mortgage Loan

Document Summary

Get access

Related Documents

ADMS 2610 Lecture Notes - Lecture 19: Accounts Receivable, Stamen, Fide

ADMS 2610 Chapter Notes - Chapter 13: Chattel Mortgage, Accounts Receivable, Security Interest

ADMS 2610 Lecture Notes - Lecture 5: Foreign Exchange Risk, Cheque, Fide

Related Questions