Lesson 7, 8, 9

What is the relationship between Interest Rate and Principal?

Indirect relationship, as time goes on, your loan balance will decrease, also decreasing the amount of interest your rate can collect.

What is the relationship between NPV and discount rate?

Indirect: As NPV goes up, discount rate decreases.

What is the relationship between contract length and flexibility?

Indirect: the shorter the contract length, the greater the flexibility.

How do you calculate Interest Payment?

Interest Payment = PMT - Principal Payment

What is a Payment Cap?

It is a limit on a month or annual payment that you can put in your contract. Unpaid interest can be added to loan balance.

What is an Adjustable Mortgage Rate?

It is a mortgage interest rate that can be adjusted after a certain period of time.

What is a Contract Rate?

It is the Index Rate and the Margin Rate added. Contract Rate = Index Rate + Margin Rate

What is a Teaser Rate?

It is the initial interest rate offered by the lender.

What is an Adjustment Period?

It is typically a fixed number of years that an interest rate is agreed on, then will change adjust to inflation after a certain number of years. Typically looks like [Number of fixed years / How many years till adjustment] Ex: 1/1 will mean fixed interest rate for one year, and interest rate will adjust every year. Ex: 5/2 will mean fixed interest rate for five years, and interest rate will adjust every two years

What is Amortization?

It's a schedule that shows how much of your monthly payment goes towards interest and principal each month for the full term of the loan.

How do you calculate Lender's Yield?

Lender's Yield = Total PV - the discount point

If interest rates go up, who is the loser? Lender or borrower?

Lender.

What is a Positive Amortization?

Lenders typically require a borrower to repay part of the principal with each loan payment due to reduce their payment risk. This results in loan balance decreasing with each payment

Consider a 20-year loan with a monthly payment of $1,897.95 and an annual interest rate of 4.5 percent. What was the original loan size? (Round your answer to the nearest whole dollar.)

$300,000

What is an Index Rate?

An interest rate used as a margin of error for unexpected inflation. This interest rate can change over years.

What is the relationship between interest rate and lender's risk?

Direct. Interest rate goes down as lender's risk goes down.

What is a Fully Amortized Loan?

If you make every payment according to original schedule on your term loan, your loan will be fully paid off by the end of the term.

What does 1/1, 5/1, and 5/2 mean?

1/1 - Fixed payments for 1 year, then annual adjustments 5/1 - Fixed payments for 5 years, then annual adjustments 5/2 - Fixed payments for 5 years, then adjustments every 2 years

Most real estate loans have a definite term to maturity, stated in years. The majority of home loans will typically have a term to maturity between: 1-5 years. 5-7 years. 7-15 years. 15-30 years.

15-30 years.

Are ARM rates or FRM rates lower?

ARM, also less risk.

Suppose you have taken out a $400,000 fully-amortizing fixed rate mortgage loan that has a term of 15 years and an interest rate of 3.75%. In month 1 of the mortgage, how much of the monthly mortgage payment does the interest portion consist of? $9.09 $1,250.00 $1,658.89 $2,908.89

$1,250.00

Calculate the original loan size of a fixed-payment mortgage if the monthly payment is $1,581.59, the annual interest rate is 5.0 percent, and the original loan term is 15 years. (Round your final answer to nearest whole dollar amount.)

$200,000

Mortgage Total acquisition price: $1,056,000 First Mortgage Loan: $792,000 (75% Loan To Value, LTV) Annual Mortgage Interest Rate: 6.5% Loan term and amortization period : 30 years Up front financing costs: 3% of loan amount Calculate the remaining mortgage balance.

$741,399

Suppose you have taken out a $200,000 fully-amortizing fixed rate mortgage loan that has a term of 15 years and an interest rate of 4.25%. In month 2 of the mortgage, how much of the monthly mortgage payment does the principal repayment portion consist of? $705.51 $708.33 $796.22 $799.04

$799.04

On a level-payment loan with 12 years (144 payments) remaining, at an interest rate of 9 percent, and with a payment of $1,000, the current balance is: $144,000. $100,000. $87,871. $76,137.

$87,871.

What are the 3 main risks for lenders?

1) When the mortgagor stops making payments a.k.a. Defaulting/Foreclosure. 2) Unanticipated inflation decreases value of future payments by borrowers. 3) The mortgagor could have more money than anticipated and prepay the remaining balance at a lower interest rate.

$400,000 with 5/1 Hybrid ARM, Payments matched to 30-year Amort Schedule, Initial Rate of 6.12%, Indexed to LIBOR + 276bp, LIBOR = 4.8% at the time of origination What is the Size of the 1st Payment? What is the Size of the 56th Payment? What is the Size of the 61st Payment?

1st Payment - $2,429.15 56th Payment - $2,429.15 61st Payment - $2,769.27

What is the most popular ARM?

5/1 - 5 years fixed, changes every year after.

Given the following information, calculate the lender's yield (rounded to the nearest tenth of a percent). Loan amount: $166,950 Term: 30 years Interest rate: 8% Monthly Payment: $1,225.00 Discount points: 2 Other Closing Expenses: $3,611 7.7% 8.2% 8.5% 9.1%

8.2%

Given the following information, calculate the effective borrowing cost (rounded to the nearest tenth of a percent). Loan amount: $166,950 Term: 30 years Interest rate: 8% Monthly Payment: $1,225.00 Discount points: 2 Other Closing Expenses: $3,611 7.7% 8.2% 8.5% 9.1%

8.5%

What is a Subprime Loan?

A high interest rate loan given to borrowers with a poor credit score.

What is an Adjustable Rate Mortgage (ARM)?

A mortgage whose rate of interest is adjusted periodically to reflect market conditions.

You have taken out a $100,000, one-year ARM. The teaser rate in the first year is 4.5% (annual). The index interest rate after the first year is 3.25% and the margin is 2.75%. (Note: The term on this ARM is 30 years.). Given this information, determine the contract rate of year 1 and year 2 when there is no cap or with a periodic (annual) rate cap of 1.00%.

Answer: With no cap: year 1: 4.5%, year 2: 6% (index + margin) Answer: With cap: year 1: 4.5%, year 2: 5.5% (annual cap)

For a loan of $100,000, at 4 percent annual interest for 30 years, find the balance at the end of 4 years and 15 years, assuming monthly payments. (Do not round intermediate calculations and round your final answer to two decimal places.)

Answer; Balance at the end of 4 Years: $92,513.56 Answer: Balance at the end of 15 Years: $64,542.80

How do you calculate Before-Tax Cash Flow? (BTCF)

BTCF = Net Operating Income (NOI) - Mortgage Payment = NOI - yearly debt service

What is BTER and how do you calculate it?

BTER is Before-Tax Equity Reversion. It means the pre-tax amount of money you will receive after selling the property before your loan period is over. You will need to take the loan amount into consideration. BTER = NSP - Remaining Mortgage Balance (RMB)

What determines interest rates?

Because mortgage loans are "lower risk" debt, they can loan out more. So, the lower their risk and the higher their ROI, the lower the interest rate.

Why do banks not invest in Real Estate?

Cause they aren't Real Estate experts and prefer a lower, more certain ROI with debt.

How do you calculate Closing Expenses?

Closing expenses = discount point + closing cost

Consider a one-year, $150,000 ARM with a 30-year amortization period. The index rate is currently 3.75 percent, and you estimate that it will increase by 25bp (0.25%) each year for the following 2 years. The fixed margin is 225bp (2.25%), but the lender is offering a teaser rate of 5 percent for the first year of the mortgage. Suppose that the ARM has a 1 percent annual adjustment cap and a 6 percent overall cap. What is contract rate of year 1,2,3? What is loan balance and monthly payment for each of the year 1 and year 2? Assume the rate cap applies to the teaser rate.

Contract Rate, Loan Balance, Monthly Payment (respectively) Year 1 - 5%, $150,000, $805.232 Year 2 - 6%, $147,786.95, $897.074 Year 3 - 6%

What are Discount Points?

Fees paid directly to the Lender at Closing exchange in trade for a reduced interest rate. One point = 1% of the mortgage.

What are three risks for Lenders

Foreclosure, Unexpected Inflation, and Refinance (Mortgagor can prepay remaining balance at lower interest rate)

What is a Fixed Rate Mortgage?

Locks in the interest rate for the entire life of the loan.

What is a Hybrid ARM?

Longer Initial Adjustments of ARM

What type of mortgage do borrowers prefer? Why?

Longer initial adjustment periods such as 3/1, 5/1, or 10/1. This is because shorter initial adjustment periods result in a higher interest rate.

For calculations in these three lessons, what is our variable of time (or n)?

Monthly

Assume that you have purchased a home and can qualify for a $200,000 loan. You have narrowed your mortgage search to the following two options: Mortgage A Loan term: 30 years Annual interest rate: 6 percent Monthly payments Up-front financing costs: $5,000 Discount points: 3 Mortgage B Loan term: 15-years Annual interest rate: 5.5 percent Monthly payments Up-front financing costs: $7,000 Discount points: 3 Q. What is Mortgage A's effective borrowing cost? 6.54% Q. What is Mortgage B's effective borrowing cost? 6.55% Q. Based on the effective borrowing cost, which loan would you choose as a borrower? Q. What is Mortgage A's lender's yield? 6.29% Q. What is Mortgage B's lender's yield? 5.97% Q. Based on the effective borrowing cost, which loan would you choose as a lender?

Mortgage A payment = $1,199.10 Mortgage A effective borrowing cost = 6.54% Loan A, as it has cheaper EBC Mortgage B payment = 1,634.17 Mortgage B effective borrowing cost = 6.55% Loan A, as it has better lender's yield. PV = ($200,000 × 0.97) − $7,000 = $194,000 − $7,000 = $187,000 EBC = 0.5459 monthly × 12 = 6.55%; so mortgage A has a slightly lower EBC Do it yourself for lender's yield.

How do you calculate Net Present Value (NPV)?

NPV = PV(in) - PV(out) = PV of expected cash flow - PV of cost.

What is Lender's Yield?

Now a lender pays out $145,000 (Total PV - the discount point = $ 150,307.57- $5,307.57) to borrower on the day they close the loan. What loan interest rate is this deal equivalent if the borrower pay $1,000 every month for 30 years? 360; -$145,000; $1,000; 0 n; PV; PMT; FV "Iender's yield"/ Internal Rate of Return (IRR) "7.36% (=i/y*12month) By charging advanced interest of $5,307.59, the lender is able to increase her yield (IRR) from 7% to 7.36%

Calculate NPV of the following below: An apartment building that costs $1 million has a discount rate is 12%, anticipated cash flow is $50,000 per year, and you sell the property in 5 years for $1.2 million. What is the NPV? Should you invest in it?

PV(in) = $861,151.04 PV(out) = $1,000,000 NPV = $-138,849 Do not invest, net cash flow is negative meaning you lost money in terms of Time Value.

How do you calculate PV(in)?

PV(in) = Before Tax Cash Flow + Before Tax Equity Reversion

How do you calculate Principal Payment?

Principal Payment = Y2 of month you are looking for

How do you calculate Net Sale Proceeds (NSP)?

Sale price (SP) - Selling Expenses (SE) = Net Sale Proceeds (NSP)

What is Effective Borrowing Cost?

Supposed that our previous loan has total closing expenses of $8,000 ($5,307.57 in discount point, $2,692.43 in other closing costs not paid to lender) Therefore, the borrower receives $150,307.57 on the day of loan closing (the face value of loan) less $8,000 = 142,307.57 360; $142,307.57; -$1,000; 0; (0.63) (annual rate of 7.55%) What is the Effective Borrowing Cost(EBC) of borrowers? Implied IRR from the borrower's perspective "7.55%

How do you calculate Present Value (PV) at a certain %?

Take the cash flow of the given year and divide it by [1 + %]

Assume that a borrower has a choice between two comparable fixed-rate mortgage loans with the same interest rate, but different mortgage terms, one being a 30-year mortgage and the other a 15-year mortgage. Under financially unconstrained circumstances, which of the following statements best describes the borrower's preference? The borrower would prefer the 30-year mortgage. The borrower would prefer the 15-year mortgage. The borrower would be indifferent between the two mortgages. The borrower is unable to compare mortgage loans of two different maturities.

The borrower would be indifferent between the two mortgages.

The more flexible the contract is... (finish the sentence)

The less borrowers like and the more lenders like it.

What is a Principal; in terms of Mortgages?

The principal is the amount you borrowed and have to pay back.

What is the difference between a 15-year vs. 30-year?

The risk for the lender goes down with a shorter duration of time. Borrowers Gains Equity Faster (Less Default Risk). Lenders Exposed Less to Interest-Rate Risk. Accordingly offer Borrowers Lower Interest Rates

What is a Secondary Market?

The secondary market in commercial real estate occurs when investors buy out existing investors in an active project.

When lenders charge discount points (prepaid interest) on a loan, what impact does this have on the loan's yield? The yield on the loan will increase. The yield on the loan will decrease. The yield on the loan will be unaffected. The yield on the loan automatically becomes zero.

The yield on the loan will increase.

What is the Mortgagor?

They are the Borrowers. Traits include: Smooth Consumption Across Periods, Diversify Risks of Investments, Leverage or Magnify Returns to Equity.

What is the Mortgagee?

They are the Lenders. Traits include: Want to Maximize Risk-Adjusted Return on Surplus Income for themselves or others, Include: Banks, Insurance Companies, Government Sponsored Enterprise (GSEs), Real Estate Investment Trust(REITs)

If an initial adjustment period is lower, lenders usually do what with the interest rate?

They usually lower the interest rate.

What is a Margin Rate?

This compensates lenders for unwanted risk. The gap between Contract and Index Rates.

How do you calculate PV(out?)

Total Acquisition Price - (Loan Mount - Financing Cost)

How do you calculate loan balance at the end of your term?

Transfer all of your annual numbers into monthly numbers (x/12), and then put FV = 0, solve for PMT.

How long is an Adjustment Period?

Typically between 3 - 6 years

What is Closing Cost?

Upfront costs that the Borrower did not pay to the Lender. ex: Title insurance, Mortgage insurance, Appraisal and other survey, Document Preparation

What is a Leverage?

Use of borrowed funds to magnify returns (or losses).

What is a Negative Amortization?

When a borrower is making required payments on a loan, but the amount they own continues to rise because the minimum payment doesn't cover the cost of interest. Exactly like a credit card.

$100,000 ARM with a 30-year, 1/1 ARM, the first-year contract teaser rate is 3.25 percent. Index rate is the one-year Treasury rate (2.00percent), and margin is 2.75 percentage points (275 basis points). In the third year, the index rises to 2.25 percent. 1 percent annual adjustment cap (i.e. periodic cap)/ 5 percent overall cap. What are year 1, 2, and 3's Contract Rates?

Year 1 - 3.25% Year 2 - 4.25% Year 3 - 5%

Consider $100,000 ARM with a 30-year amortization schedule 1/1 ARM: The adjustment period is one year, index rate is the one-year Treasury rate, and margin is 2.75 percentage points (275 basis points). Assume the current rate on one-year Treasury rate is 2.00 percent, and the first-year contract teaser rate is 3.25 percent. Also, In the third year, the index rises to 2.25 percent What are the monthly payments for year 1,2,3?

Year 1, 2, 3 are $435.21, $519.22, $533.58

1/1 ARM: The adjustment period is one year, index rate is the one-year Treasury rate, and margin is 2.75 percentage points (275 basis points). Assume the current rate on one-year Treasury rate is 2.00 percent (index), and the first-year contract teaser rate is 3.25 percent. What are the contract interest rate for year 1,2,3? In the second year, the index stays the same as the first year. In the third year, the index rises to 2.25 percent. 1 YEAR: TEASER RATE ||| 2 YEAR: Index (changing) + Margin (2.75)

Year 1, 2, 3 are 3.25, 4.75, 5 respectively.

Consider a one-year, $150,000 ARM with a 30-year amortization period. The index rate is currently 3.75 percent, and you estimate that it will increase by 25bp (0.25%) each year for the following 2 years. The fixed margin is 225bp (2.25%), but the lender is offering a teaser rate of 5 percent for the first year of the mortgage.

Year 1: Teaser: 5% Year 2: Index (3.75+0.25%) + Margin(2.25%) = 6.25% Year 3: Index (4+0.25%) + Margin(2.25%) = 6.5%

Consider a one-year, $150,000 ARM with a 30-year amortization period. The index rate is currently 3.75 percent, and you estimate that it will increase by 25bp (0.25%) each year for the following 2 years. The fixed margin is 225bp (2.25%), but the lender is offering a teaser rate of 5 percent for the first year of the mortgage.Suppose that the ARM has a 1 percent annual adjustment cap and a 6 percent overall cap. What is contract rate of year 1,2,3?

Year 1: Teaser: 5% Year 2: No cap 6.25% vs. Annual Cap 6% (5+1%) vs. Overall 6% Year 3: No cap 6.5% vs. Annual Cap 7.25% (6.25+ 1%) vs. Overall Cap 6% (Take the smaller rate)

Do borrowers and lenders share interest risk?

Yes

How do you interpret Internal Rate of Return?

You calculate the Internal Rate of Return on the Financial calculator, whatever that rate% is, if the rate is greater than the next best alternative rate's, then invest,

The dominant loan type originated by most financial institutions is the: a) fixed-payment, fully amortized mortgage. b) adjustable rate mortgage. c) purchase-money mortgage. d) FHA-insured mortgage.

a)

You have taken out a $225,000, 3/1 ARM. The initial rate of 5.8% (annual) is locked in for 3 years and is expected to increase to 6.5% at the end of the lock period. Calculate the initial payment on the loan. (Note: The term on this 3/1 ARM is 30 years.) a) $1,320.19 b) $1,422.15 c) $1,874.45 d) $1959.99

a)

Assume the following: Loan amount:$100,000 Interest rate: 10 percent annually Term: 15 years, monthly payments a. What is the monthly payment? b. What will be the loan balance at the end of nine years? c. What is the effective borrowing cost on the loan if the lender charges 3 points at origination and the loan goes to maturity? d. What is the lender's yield on the loan if the lender charges 3 points at origination and the loan goes to maturity?

a) $1,074.605 b) $58,006 c) 10.54% d) 10.54%

Consider a 25-year loan with an annual interest rate of 7 percent and monthly payments of $1,201.5246 (to be precise). The discount points charged by the lender at origination are 3 percent and the cost of borrower title insurance and mortgage insurance are, respectively, 0.5 percent and 2.0 percent of the loan amount. Additional fees paid to other third parties (i.e., not the lender) will equal $4,000. Required: a. What is the loan amount? b. What is the lender's yield/IRR? c. What is the effective borrowing cost (EBC)?

a) $170,000 b) 7.34% c) 7.93%

For a 30-year loan with a face value of $150,000, 5 percent annual interest, and monthly payments, find the monthly payment and remaining mortgage balance at the end of years 5, 20, and 30. a. What is the monthly payment? b. What will be the remaining mortgage balance at the end of 5 years? c. What will be the remaining mortgage balance at the end of 20 years? d. What will be the remaining mortgage balance at the end of 30 years?

a) $805.232 b) $137,743.10 c) $75,918.40 d) $0

The initial short-term introductory rate offered on adjustable rate mortgages (ARMs) is more commonly referred to as a(n): a) margin rate. b) teaser rate. c) index rate. d) discount rate.

b)

The most common adjustment interval on an adjustable rate mortgage (ARM) once the interest rate begins to change has been: a) six months. b) one year. c) three years. d) ten years. e) None of the choices are correct.

b)

Which of the following statements best describes the relation between interest rates offered on comparable fixed-rate and adjustable rate mortgage (ARM) loans? a) ARM interest rates are typically greater than those on fixed-rate mortgages since interest rate risk is borne by both borrower and lender in an ARM. b) ARM interest rates are typically less than those on fixed-rate mortgages since interest rate risk is borne by both borrower and lender in an ARM. c) ARM interest rates are typically greater than those on fixed-rate mortgages since interest rate risk is borne solely by the lender in an ARM. d) ARM interest rates are typically less than those on fixed-rate mortgages since interest rate risk is borne solely by the borrower in an ARM.

b)

ou have taken out a $100,000, one-year ARM. The teaser rate in the first year is 4.5% (annual). The index interest rate after the first year is 3.25% and the margin is 2.75%. (Note: The term on this ARM is 30 years.) There is also a periodic (annual) rate cap of 1.00%. Given this information, determine the monthly mortgage payment you would be scheduled to make in month 1 of the mortgage loan's term. a. $321.64 b. $506.69 c. $567.79 d. $599.55

b)

In considering a 3/1 adjustable-rate mortgage (ARM), the interest rate will be fixed for how many years? a) one year b) two years c) three years d) four years

c)

You have taken out a $100,000, one-year ARM. The teaser rate in the first year is 4.5% (annual). The index interest rate after the first year is 3.25% and the margin is 2.75%. (Note: The term on this ARM is 30 years.) There is also a periodic (annual) rate cap of 1.00%. Given this information, determine the monthly mortgage payment you would be scheduled to make in month 13 of the mortgage loan's term. a. $321.64 b. $506.69 c. $566.26 d. $597.21

c)

You have taken out a $300,000, one-year ARM. The teaser rate in the first year is 5.5% (annual). The index interest rate after the first year is 4.00% and the margin is 2.25%. (Note: The term on this ARM is 30 years.) There is also a periodic (annual) rate cap of 1.00%. Given this information, determine the monthly mortgage payment you would be scheduled to make in month 13 of the mortgage loan's term. a. $980.08 b. $1,703.37 c. $1,843.88 d. $1,891.81

c)

You have taken out a $350,000, 3/1 ARM. The initial rate of 6.0% (annual) is locked in for 3 years. Calculate the outstanding balance on the loan after 3 years. The interest rate after the initial lock period is 6.5%. (Note: The term on this 3/1 ARM is 30 years.) a) $2,098.43 b) $2,183.95 c) $336,294.25 d) $347,901.57

c)

You have taken out a $350,000, 3/1 ARM. The initial rate of 6.0% (annual) is locked in for 3 years. Determine the owner's equity in the property after 3 years if the market value of the property at the end of year 3 is $400,000. The interest rate after the initial lock period is 6.5%. (Note: The term on this 3/1 ARM is 30 years.) a. $13,705.75 b. $50,000.00 c. $63,705.75 d. $336,294.25

c)

Lender's yield differs from effective borrowing cost (EBC) because: a. lender's yield is strictly a yield to loan maturity and EBC is not. b. EBC is strictly a yield to maturity and lender's yield is not. c. EBC accounts for additional third-party up-front expenses paid by the borrower that lender's yield does not account for. d. lender's yield accounts for additional third-party up-front expenses that EBC does not.

c. EBC accounts for additional third-party up-front expenses paid by the borrower that lender's yield does not account for.

Which of the following statements best describes the impact of a rate cap on an adjustable rate mortgage (ARM)? a. A rate cap increases the overall level of interest rate risk exposure on the mortgage loan for both borrower and lender. b. A rate cap decreases the overall level of interest rate risk exposure on the mortgage loan for both borrower and lender. c. A rate cap increases the proportion of interest rate risk borne by the borrower relative to the lender. d. A rate cap decreases the degree of interest rate risk borne by the borrower relative to the lender.

d)

With the recent popularity of adjustable-rate mortgages (ARM), lenders have begun to offer ARMs with different adjustment periods. Which of the following ARM choices will most likely have the highest initial rate? a) three-year-one-year ARM b) five-year-one-year ARM c) seven-year-one-year ARM d) ten-year-one-year ARM

d)

You have taken out a $300,000, 5/1 ARM. The initial rate of 5.4% (annual) is locked in for 5 years. Calculate the payment after recasting the loan (i.e., after the reset) assuming the interest rate after the initial lock period is 8.0%. (Note: The term on this 5/1 ARM is 30 years.) a) $1,684.59 b) $1,784.79 c) $1,887.75 d) $2,138.02

d)

Consider a one-year, $150,000 ARM with a 30-year amortization period. The index rate is currently 3.75 percent, and you estimate that it will increase by 25bp (0.25%) each year for the following 2 years. The fixed margin is 225bp (2.25%), but the lender is offering a teaser rate of 5 percent for the first year of the mortgage. a. Calculate the contract rate, remaining loan balance, and monthly payment for each of the three years.Adjustable rate mortgages commonly have all the following except: a) a teaser rate. b) a margin. c) an index. d) a periodic interest rate cap. e) an inflation index.

e)

The dominant loan type originated by most financial institutions is the: fixed-payment, fully amortized mortgage. adjustable rate mortgage. purchase-money mortgage. FHA-insured mortgage.

fixed-payment, fully amortized mortgage.

The internal rate of return on a mortgage loan calculated from the lender's perspective is more commonly referred to as the: discount point. effective borrowing cost. lender's yield. loan constant.

lender's yield.

Standard mortgage loans require monthly payments typically composed of two components: interest and principal repayments. When scheduled mortgage payments are insufficient to pay all of the accumulating interest, causing some interest to be added to the outstanding balance after each payment shortfall, the loan is said to be: fully amortizing. partially amortizing. nonamortizing. negatively amortizing.

negatively amortizing.