Real Estate Finance: You are currently considering buying a new flat and have re

Question

Real Estate Finance:

You are currently considering buying a new flat and have received the following offer from your bank:

Loan amount: NOK 6,000,000. Type of Loan: CPM with monthly payments at 5% interest per year. Term: 30 years. The NOK 6,000,000 loan currently finances 100% of the flat's market value. Annual price appreciation is expected to average 3% per year over the next 10 years.

What is the monthly payment that will fully amortize the loan over the 30 year period?

Given an annual price appreciation of 3 percent, what loan balance is consistent with owning 50% of your flat after 10 years?

Assuming that the annual price increase averages 4 percent (instead of 3 percent) per year over the next 10 years; which monthly payment is consistent with owning 50% of the flat after that period of time?

Explanation / Answer

monthly payment is = [6,000,000*0.05/12*(1+0.05/12)^360]/[(1+0.05/12)^360-1] = $32,209.30

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