[Condor51]

*** friends of mine just got .. modification program finalized. ... mortgage is $167,000 and she will pay $750 a month for 40 years with a balloon payment at the end of $100,000 ***

$750 x 12 = $9,000
$9,000 x 40 = $360,000
$360,000 + $100,000 = $460,000

$460,000 / $167,000 = 2.7545
2.7545 is = to 27.545% Interest

I don't know where you live but I were them I'd go see a Mobster (Italian) and get a Juice Loan. The 'vig' would be a whole lot less₍₁₎.

And if you fall behind with the Wiseguys they only break your leg. These Service Companies ruin your credit for life.

A broken leg is a better deal.

(1) Prime rate, fed funds, COFI, This week
WSJ Prime Rate: 3.25%
Federal Discount Rate: 0.75%
Fed Funds Rate (Current target rate 0-0.25): 0.25%
11th District Cost of Funds: 1.484%

[koraz]

Your math is wrong. When you do a NPV calculation you will find that this is a 5.08% annual interest rate.

(Present value of $167,000, monthly payments of $750 for 480 months with a $100,000 lump sum payment at the end, results in a monthly interest rate of .4234) Multiply by 12 and this is an annual rate of 5.08

[TopQuark]

2.7545 is = to 27.545% Interest

What on earth does that equality sign mean?

[TopQuark]

Where did you get that percentage?

The data you site show that the interest rate is 4.894% .

[TopQuark]

“site” shoud’ve been “cite,” of course. Sorry.

[willyd]

I don’t think you have the foggiest idea what you are talking about. The interest rate is somewhere between 5 and 5.5% on that loan depending on how much was allocated of that payment for pmi and taxes.