Ann wants to buy a building. the annual noi for the building will be $165,000. she wants to get a 20 year interest only fixed rate mortgage at an annual rate of 7.35% with annual compounding and annual payments to buy the building. the lender has a minimum debt service coverage ratio (dscr) of 1.25. the lender also has a maximum ltv requirement of 70%. the asking price is $3,000,000.what is the largest mortgage the lender will give ann based on both the dscr and ltv requirements? (a) $132,000(b) $1,795,918.37(c) $2,100,000(d) $2,532,047.61

correct option is (B) $1,795,918.37

Explanation:

given data

annual NOI = $165,000

time = 20 year

annual rate = 7.35 %

Debt Service Coverage Ratio (DSCR) = 1.25

maximum LTV requirement = 70%

price = $3,000,000

to find out

largest mortgage the lender will give Ann based on both the DSCR and LTV requirement

solution

first we get here PMT that is

DSCR =    ..............1

1.25 =

PMT = $132000

and

PMT = annual rate × balance    ............2

$132000 = 7.35% × balance

balance = $1795918.367

so

LTV will be

LTV = 70% of $3,000,000

LTV = $2100000

so largest mortgage the lender will give Ann based on both the DSCR and LTV requirement is $1,795,918.37

so correct option is (B) $1,795,918.37

24 years, i believe is the correct answer.