When the interest on a loan is below market

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When the interest on a loan is below market, a lender must offer a discount to induce the investor market (secondary market) to purchase the loan. Assume a house is worth $100,000 if purchased with all cash. The existing 9% assumable loan has monthly payment of $700, and remaining term of 15 years. If current market rate for 15 year loan is 11%, how much might (max.) a buyer pay for the house of the existing loan is assumable?

Reference no: EM13978925

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