Image Source
THE SCENARIO
A friend contacted me this week for help figuring out a note he's considering buying. The note's details:
30-year fully amortizing loan, $85,000 borrowed, 9.75% interest rate.
The borrower paid for 4 years, then stopped paying for 8 years.
The question: If the amount owed increases during the non-payment period with compounding 9.5% interest and accrues no late fees or other non-interest charges, how much does the borrower owe at the end of the total 12-year period?
THE SOLUTION
This is a multi-step problem.
- Figure out the payment on the loan.
- Figure out how much the borrower owed after making payments for 4 years.
- Figure o... Read more...
