Home loans typically involve "points", which are fees charged by the lender. Each point charged means that the borrower must pay 1 percent of the loan amount as a fee. For example, if the loan is for $100,000, and two points are charged, the loan repayment schedule is calculated on a $100,000 loan, but the net amount the borrower receives is only $98,000. What is the effective annual interest rate charged on such a loan assuming loan repayment occurs over 360 months? Assume the interest rate is 1 percent per month.© BrainMass Inc. brainmass.com October 4, 2022, 3:57 pm ad1c9bdddf
For this loan, we use 100,000 as the present value to compute the mortgage.
Then the monthly interest rate = 1%
Number of months = 360
By a ...
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