[Condor51]

2.7545 is = to 27.545% Interest

*** What on earth does that equality sign mean?***

I'll expound:

Mathematically that 2.7545 is equal to a 27.545% Interest rate, to wit:

$167,000 at 27.545% Interest equals $467,000 at the end of forty years (167K x 1.27545%)
[I included the 100k Balloon payment over the 40 years for simplicity. As one way or another it has to be paid.]

In short, they're getting screwed.

[R4nd0m]

Your intention is genuine but simple interest is resulting in a scary rate. The correct method would be based on the PV tables. A quick calculation (not detailed) says the rate should be betn 3.5 and 4 percent...