MORTGAGEE & MORTGAGOR INTERESTS QUESTIONS

1 Determine the annual repayments for a loan of \$30 000 at 12% pa over a period of 20 years.

2 Determine the mortgagee's and mortgagor's interest in the above property at the end of year 5,10,15 if the expected market value of the property will be \$50 000, \$100 000, and \$200 000 respectively.

3 What do the answers in 1 and 2 illustrate about the amount of capital repaid (under credit foncier finance) in mortgage loan repayments and mortgagor's interests over a period of time?

4 A client has the choice of renting or buying an industrial property. From the information below which option would you recommend?

Assume that there are no tax advantages with the lease option.

The asking price is \$1500 000.
MORTGAGE: 100% borrowed at 16% pa over 15 years.
LEASE: an annual rent of 20% pa.

5 A mortgage over a 15 year period has annual repayments of \$4 000. Determine the interest rate charged if the amount borrowed was \$30 000. Why must the calculation be by way of trial and error?

6 A mortgage agreement requires repayments of \$12 000 pa. What is the mortgage term if the interest rate is 14% pa?

7 Your client wishes to borrow \$200 000 and has the choice of 2 mortgages:

(a) Term: 50 years Interest rate: 15.5% pa
(b) Term: 5 years Interest rate: 15.5% pa

Which mortgage would you recommend?

8 Determine the annual rental equivalents of the following leases:

(a)
Rent: \$20 000 pa
Term: 5 years
Interest rate: 11% pa

(b)
Rent: \$10 000 pa
Term: 10 years
Interest rate: 10% p a

(c)
Rent: \$5 000 pa
Term: 20 years
Interest rate: 10% pa

9 Determine the Lessee's and Lessor's Interests in the following property:

• Rent: \$2 000
• Term: 5 years
• Market rent: \$5 000 pa
• Interest! capitalization rate: 13% pa

10 Determine the equivalent cash price for the following sales:

(a)
Sale price: \$200 000
Interest rate: 12% pa
Term: 20 years
Normal interest rate: 15% pa.

(b)
Sale price: \$300 000
Interest rate: 12% pa
Term: 20 years
Normal interest rate: 14% pa

(c)
Sale price: \$400 000
Interest rate: 13% pa
Term: 20 years
Normal interest rate: 12% pa

(d)
Sale price: \$400 000
Interest rate: 13%pa
Term: 20 years
Normal interest rate: 13 % pa

(e)
Sale price: \$400 000
Interest rate: 13% pa
Term: 20 years
Normal interest rate: 11 % pa

11 How does a premium paid by a lessee 10 years ago affect his/her profit rental today?

12 Determine the annual rental equivalent of the following lease:

• Term: 10 years
• Base rent: \$200 000 pa
• Rent free (including premium and fines) Period: 3 years
• Bonus office partitioning worth: \$50 000