Real Estate Economics Mortgage Instruments: Jing Li Singapore Management University

Real Estate Economics
Mortgage Instruments
Jing Li
Singapore Management University
October 8, 2023
Mortgage Instruments
To facilitate the flow of credit from lenders to borrowers, various mortgage instruments
have been developed.
I Fixed-rate mortgage (FRM)
I A fixed-rate mortgage has the same interest rate and monthly payment throughout
the term of the mortgage. The payment is calculated to pay off the mortgage
balance at the end of the term. The most common terms are 15 years and 30 years.
I Adjustable-rate mortgage (ARM)
I The monthly payment is calculated to pay off the entire mortgage balance at the
end of the term. The term is typically 30 years. After any fixed interest rate period
has passed, the interest rate and payment adjust at the frequency specified.
Jing Li (SMU) Mortgage Instruments 1/70

FRM Terms
Time Value of Money
Definition:
I Money has the capacity to earn interest rate over time. Therefore, money
available at the present time is worth more than the same amount in the future.
Example
I Assuming a 5% interest rate, $100 invested today will be worth $105 in one year
($100 multiplied by 1.05). Conversely, $100 received one year from now is only
worth $95.24 today ($100 divided by 1.05), assuming a 5% interest rate.

FRM Terms
Convert to Present Value
From Future Value:

FV
PV =
(1 + i)n
From Future Payments (Annuity):
n
X PMT PMT PMT PMT
PV = t
= 1
+ 2
+ ... +
t=1
(1 + i) (1 + i) (1 + i) (1 + i)n
PMT PMT PMT

(1 + i)PV = PMT + + + ... +
(1 + i)1 (1 + i)2 (1 + i)n−1
PMT
(1 + i)PV − PV = PMT −
(1 + i)n
(1 + i)n − 1
PV = PMT [ ]
i(1 + i)n

FRM Terms
Mortgage Conversion Factors
Present Value of Interest Factor (PVIF):
1
PVIFi,n =
(1 + i)n
Present Value Interest Factor for an Annuity (PVIFA):
(1 + i)n − 1
PVIFAi,n =
i(1 + i)n
Mortgage Constant (MC):

i(1 + i)n
MCi,n =
(1 + i)n − 1

FRM Terms
Terms of the Loan
I Loan Amount (PV)

I Contract Interest Rate (i)
I Maturity or Term (n)
I (Monthly) Payment (PMT)

FRM Terms
Example
Suppose You Borrow $100, 000 @ 7.50% for 30 Years, what is your Monthly Payment?
Ans:
PMT = 100, 000 × MC7.5,30

0.075 0.075 30×12
12 (1 + 12 )
= 100, 000 ×
(1 + 0.075
12 )
30×12 − 1
= 100, 000 × .0069921

= 699.21

FRM Terms
Financial Calculator
Keystrokes for Payment Calculation

I Enter loan amount as negative PV
I Enter the contract rate (adjusted monthly)
I Enter the number of payments (adjusted monthly)
I Solve for payment (PMT)

FRM Terms
Compounding periods
The maturity n and yield to maturity i can be adjusted for any length compounding
period by measuring time in compounding periods and i as a periodic rate.
I If the mortgage is compounded monthly, then n = number of years times twelve,
and the monthly period rate im is the annual periodic rate ia divided by 12.
I Example
Annual Compound Monthly Compound

PV = 100.0 PV = 100.0
ia = 12% = .12 im = ia /12 = .01
n = 12 years n ∗ 12 = 144 months
FV =? FV =?
FV = 389.60 FV = 419.06
FRM Terms
Examples
Calculate the required monthly payment Calculate the maximum loan size you can
if maturity is 30 years, annual interest rate borrow if you can pay $1000 per month,
is 8% and principal is $ 150,000 the annual interest rate is 7.5%, and the
maturity is 25 years.
N = 360 months N = 25 ∗ 12 = 300months

Im = 8%/12 = 0.66667 PMT = $1000
PV = 150, 000 Im = 7.5/12 = 0.6250
PMT =? PV =?
PMT = $1, 100.65 PV = $135, 319.61

FRM Terms
Examples
Calculate the maturity of a loan Calculate the interest rate of a loan if the
if the monthly payment is $ 843.86, principal amount of the loan is $ 175,000, the
the principal balance is $ 100,000 monthly payment is $ 1,367.36 and the matu-
and the interest rate is 6% rity of the loan is 30 years.
i = 6/12 = 0.5 N = 30 ∗ 12 = 360

PV = 100, 000 PMT = $1, 367.36
PMT = 843.66 PV = 175, 000
N =? i =?
N = 180 months i = 0.72292%/month
(8.675%/year )

Outstanding Balance
In real estate, we frequently need to know what the remaining unpaid balance of the
loan will be at some future date.
I A borrower is thinking about selling their home (and paying off their mortgage) or
refinancing
I A borrower is considering whether to default
I The lender applies a new interest rate to the outstanding balance on an
adjustable-rate mortgage
I Interest charges in a given year depend on the outstanding balance on the loan

Outstanding Balance
Example:
I Calculate the remaining balance after 12 payments for a mortgage loan with an
original balance of $100,000, loan rate of 8%, and original term of 30 years.

Outstanding Balance
Recall . . .
360
X PMT PMT PMT PMT
PV = t
= 1
+ 2
+ ... +
(1 + i) (1 + i) (1 + i) (1 + i)360
t=1
Divide PV into two groups of payments, from the first 12 months and the remaining
348 months . . .
12 360
X PMT X PMT
PV = t
+
(1 + i) (1 + i)t
t=1 t=13
12 months after origination, the remaining portion of PV is . . .

360−12 348
X PMT X PMT
=
(1 + i)t (1 + i)t
t=13−12 t=1

Outstanding Balance
Calculate the remaining balance after 12 payments for a mortgage loan with an original
balance of $100,000, loan rate of 8%, and original term of 30 years.
N = 360 − 12 = 348 = of payments remaining

im = 8.0%/12 = .666667% = contractual periodic rate of interest
PMT = 733.76457 (based on original loan terms)
PV =?
PV = 99, 164.64
Key Point
I The unpaid principal balance on a loan is equal to the present value of all
remaining payments discounted using the contractual interest rate.

Loan Amortization
Payment consists of interest and repayment of principal.
Calculate the principal paid in the first month of an FRM with monthly payments, an
original balance of $100,000, a loan rate of 6%, and an original term of 30 years.
I N = 360; im = 6.0%/12 = 0.5000%
Step 1: Calculate PMT based on original loan terms

I PMT = 599.55
Step 2: Determine the outstanding balance after 1 payment

I PV (with N = 359 and PMT = 599.55) = 99,900.45
Step 3: Calculate the principal paid in the first month as the change in balance upon
making the first payment
I Principal paid in first month = 100,000 – 99,900.45 = 99.55
Loan Amortization
Calculate the interest paid in the first month for the same loan.
Step 1: Determine the total monthly payment and the principal paid in the first
month, as before
I Monthly payment = 599.55
I Principal paid in the first month = 99.55
Step 2: Calculate interest paid in the first month as the difference between the total
payment and principal paid
I Interest paid in first month = 599.55 – 99.55 = 500.00
Alternative Method
I Interest paid in month k is equal to im ∗ PVk (where PVk is the value of PV at
the beginning of period k before any payments are made)
I Interest paid in the first month = 500.00
Loan Amortization
Decomposing payments: Payment = Principal (PPk) + Interest (Ik). From our
previous calculations
(1 + i)n − 1 PMT
PVn = PMT ( )=
i(1 + i)n MCi,n
Principal payment in period k equals the difference in balance in period k and period k-1
(1 + i)k − 1 (1 + i)k−1 − 1 1 + i 1
PPk = PMT ( k
) − PMT ( )· = PMT ( )
i(1 + i) i(1 + i)k−1 1+i (1 + i)k
Interest payment in k equals the difference between PMT and PPk. This also equals the
periodic loan rate times the outstanding balance
1 (1 + i)k − 1 PMT
Ik = PMT − PMT ( k
) = PMT ( )=i· = i · PVi,k
(1 + i) (1 + i)k MCi,k

Loan Amortization
Loan amortization schedule for a 8% 30 Year FRM

Loan Amortization
Loan amortization schedule for a 8% 30 Year FRM

Loan Amortization

Financial Cost
Lenders frequently charge fees for originating a new loan. These cover the cost of
underwriting the loan, appraising the property, and the lender’s time and effort in
making the loan.
Sometimes, lenders also allow borrowers to purchase points upfront in order to reduce
the contractual interest rate (will not discuss this in detail).
How do these fees affect the borrower’s true cost of borrowing?

Financial Cost
A lender offers a $100,000 FRM loan to a borrower with the following terms:
I Maturity: 30 years
I Interest rate: 8%
I Total loan fees: $3,000
What is the true cost of the loan to the borrower?

Financial Cost
Step 1: Calculate the monthly payments required by the mortgage
I N = 360; imonthly = 8%/12; PV = −100, 000
I PMT = ?
I PMT = 733.76
I The mortgage requires that the borrower make 360 monthly payments of $733.76
Step 2: Determine the net amount of cash the borrower receives

I Loan Amount: 100,000
I Less Fees: (3,000)
I Net Amount: 97,000
I The borrower will only receive $97,000 at time zero (upon the origination of the
loan) and must make 360 payments of 733.76 to the lender.

Financial Cost
Step 3: Now calculate the value of i when PMT = 733.76,

n = 360, and PV = 97,000. Using a financial calculator:
I N = 360
I PMT = 733.76
I PV = 97,000
I → i = 0.69364
Because we are accustomed to thinking in terms of annual rates, the accepted custom
is to multiply this monthly rate by 12:
I 0.69364*12 = 8.32%
We call this annualized rate the true annual nominal (mortgage) rate or the Annual
Percentage Rate (APR).

Financial Cost
In order to facilitate borrower comparisons of loan costs when both the contract rate
and fees change, all lenders are required to compute and disclose the APR.
The Federal Reserve specifies how the APR is calculated. To calculate the APR for a
loan, one follows the steps below (and the regulations then allow the lender to round
to the nearest 1/8th %).
I Use the loan rate, maturity, and principal balance to calculate the monthly
payment.
I Assume the borrower makes that monthly payment for the full loan maturity.
I Calculate the net cash received by the borrower by deducting loan fees and other
costs.
I Calculate the periodic rate that equates the present value of the future monthly
payments to the net cash received.
I Annualize the periodic rate by multiplying it by 12.
Prepayment Risk
I Interest rate: 8%
In calculating the APR of 8.32% for the loan with $3,000 of fees of the earlier
example, we assumed that the borrower paid the loan over 30 years.

Prepayment Risk
I Interest rate: 8%
In calculating the APR of 8.32% for the loan with $3,000 of fees of the earlier
example, we assumed that the borrower paid the loan over 30 years.
I Is this normally what happens? No!
I People often move or refinance their original loan when the interest rate drops.

Prepayment Risk
What if you take out the loan described in the example where you pay the $3,000 in
fees but move after five years? What is your effective borrowing cost?
To calculate the effective cost of your loan, we need to calculate the discounted value
of the payments you actually make.
I You will make 60 payments
I You then pay the remaining balance of your loan

Prepayment Risk
If the loan was held to maturity, there would be 360 periodic payments and no balance
due at the end of the loan (FV = 0)
Now we need to determine the outstanding balance after 60 payments have been made
in order to be able to solve for the i = r/12 that equates the RHS of the TVM
expression with the LHS.
t=60
X 733.76 UPB60
97, 000 = r t + r 60
(1 + 12 ) (1 + 12 )
t=1

Prepayment Risk
Calculate the remaining balance given:

I N = 360 – 60 = 300
I i = 8%/12 (use the loan contract rate)
I PMT = 733.76
I PV = ?
PV = 95,069.26

Prepayment Risk
Using FV = 95,069.26 we now solve for the periodic discount rate i

I N = 60
I PMT = 733.76
I FV = 95,069.26
I PV = -97,000
I i/12 = ?
I i/12 = 0.7299
Calculate r, the true annual nominal rate, by multiplying by 12.

I Annual Effective Cost (AEC) = 0.7299*12 = 8.76%
Recall that if the borrower had held the loan to maturity, the effective cost = 8.32%

Prepayment Risk
Is prepayment a bad thing for the borrower and a good thing for the banker?
I Not necessary!
Prepayment or refinancing is often triggered by two factors

I Lower mortgage interest rate
I Increased housing prices (sale of the house or cash-out refinancing)

Prepayment Risk
When interest rate drops

I Borrowers can often take advantage of the lower mortgage rate and reduce the
cost of borrowing.
I A Lower interest rate boosts the value of FRMs, which will not happen in the
event of refinancing.
When housing value increases
I Borrowers may choose to sell or cash out home equity by doing prepayment or
refinancing.
I Lenders are forced to have higher Loan-to-value ratios for their mortgage pool in
the event of refinancing.

Prepayment Risk
To minimize the incidence of prepayment, banks often impose prepayment penalties on

borrowers.
These penalties are usually a certain percentage of the outstanding balance.
The penalties can help mitigate the prepayment risk arising from two different
incentives.

Prepayment Risk
Lower Interest Rate
A borrower took out an FRM with a loan amount of $200,000 (compounds annually)
and the following terms:
I Maturity: 25 yrs
I Interest rate: 4%
I A prepayment penalty of 1.5% of outstanding balance and transaction costs of
$1500 (assume both can be financed with the new mortgage)
I A maturity of any remortgage deal equal to the number of years remaining for
prepayment of the original loan
Under these assumptions, show only if the interest rate falls below percent,
remortgaging at the end of the 7th year will make economic sense.

Prepayment Risk
Lower Interest Rate
Loan amount: $200,000
Interest rate: 4%
Maturity: 25
Annual repayment installment: 12802.39
Prepayment penalty: $2,431

Transaction costs: $1,500
Refinancing at the end of the 7th year:

I Outstanding balance: $162,069.29
I Cost of prepayment penalty: $2,431
I Cost of transaction costs: $1,500
I Annual installment amount on the new loan should be less than 12802.39
I Which implies the annual interest rate on the new loan should be less than 3.7%
Prepayment Risk
Cash Out Home Equity
Cash-out refinancing often occurs when the underlying housing asset appreciates in
value.
It involves both substituting a new loan for an existing loan and getting some extra
cash on the strength of one’s remaining equity in the property.
Take a borrower who still owes $50,000 on a $150,000 property as an example.
I In a typical refinancing, he or she would substitute a new loan equal to $50,000
for the balance owed.
I In cash-out refinancing, he or she might go for an $80,000 loan.
I The $80,000 loan would repay the old balance outstanding, and the remainder will
be cash left at the borrower’s disposal.

Prepayment Risk
I The new $80,000 loan results in a loan-to-value ratio of about 53%, which is still
considered a safe deal for the bank.
I Other ways of tapping into one’s home equity
I Home equity loan (HELOAN)
I Home equity line of credit (HELOC)

Prepayment Risk
Five years ago a borrower incurred a mortgage for $80,000 at 10% for 30 years,
monthly payments. Currently, the market rate is 8% on 25-year mortgages. The
existing mortgage has a prepayment penalty of 5% of the outstanding balance at
prepayment for the first 10 years of the mortgage and the lender will charge 4%
financing cost on the new loan. The borrower’s opportunity investment rate is 8%.
The borrower is considering refinancing the payoff of the loan (remaining balance +
prepayment penalty)

Prepayment Risk
(a) If the borrower plans to hold either mortgage (existing mortgage or the new
mortgage) for the next 25 years, should she refinance?
(b) If the borrower plans to hold the mortgage for 8 more years, should she refinance
under the conditions in part a?
(c) Assume everything in part (a) except that, instead of refinancing the outstanding
balance, the borrower borrows $100,000 (cash-out refinancing), should she refinance?

Prepayment Risk
(a) If the borrower plans to hold either mortgage (existing mortgage or the new
mortgage) for the next 25 years, should she refinance?
Existing Loan PMT = 80,000 (MC10,30) = $702.06
Balance EOY5 = $77,259m
Payoff of Existing Mortgage = $77,259 (1.05) = $81,122
New Loan PMT = $81,122 (MC8,25 ) = $626.11
Financing Costs of New Loan = $81,122 (0.04) = $3,245
NPV = (702.06 – 626.11) (PVIFA8,25 ) – 3,245 = 9,840 – 3,245 = $6,595

Prepayment Risk
(b) If the borrower plans to hold the mortgage for 8 more years, should she refinance
under the conditions in part a?
Balance of Existing Loan at end of year 13 = $68,748
Balance of New Loan at end of year 8 = $69,703
NPV = 75.95(PVIFA8,8 ) − (69, 703 − 68, 748)(PVIFA8,8 ) − 3, 245 = $1, 623

Prepayment Risk
(c) Assume everything in part (a) except that, instead of refinancing the outstanding
balance, the borrower borrows $100,000 (cash-out refinancing), should she refinance?
Financing Costs of New Loan = $100, 000(0.04) = $4, 000
New Loan PMT = 100, 000(MC8,25 ) = $771.82
NPV = −(771.82 − 702.06)(PVIFA8,25 ) + 18, 878 − 4, 000
NPV = −9, 038 + 18, 878 − 4, 000 = $5, 840

Prepayment Risk
Recall that Mian and Sufi (2011)’s argument for direct home-equity-based borrowing
channel:

Prepayment Risk

Interest Rate Risk
The mortgage contract describes the promised future cash flows associated with a
mortgage.
I Cash flows depend on maturity, coupon rate, timing of payments
I Treating these cash flows as certain, we can calculate the present value for
different discount rates.
The same is true for all financial products with future cash flows.
N
X CFt
PV (d) =
(1 + d)t
t=1
PV (d) = Value of mortgage using discount rate d

CFt = Cash flow at time t

Tilt Problem
I $80,000, 30-year FRM; $3,000/month initial and real income

Adjustable-Rate Mortgage


There has been a dramatic increase in the level and volatility of inflation in the 1970s.
I → Inflation: 6% in 1970; 3.4% in 1972; and 13.3% in 1979
Interest rate risk becomes a serious problem (Supply Side).

Tilt problems associated with FRMs and high inflation made it difficult for many
families to afford their mortgage payments (Demand Side).

Adjustable-Rate Mortgages
Alternative mortgage instruments were designed in the 1980s to reduce the impact of
interest rate risk and mitigate the “tilt” problem, including ARMs – adjustable rate
mortgage.
An ARM is a loan on which the periodic contractual interest rate can change over the
life of the mortgage.
The rate is reset periodically to a fixed spread (called the margin) over a benchmark or
reference rate.
I The Most common reference rate is the short-term treasury rate as determined by
current market conditions.

ARM Terms
I Frequency of rate change: 6 months, 1 year, 3 years, or 5 years

I The longer the time between adjustments, the greater the interest rate risk assumed
by the lender.
I Hybrid ARM can be 3/1, 5/1, 7/1, or 10/1 where the initial lock-in period is 3, 5, 7,
or 10 years after which they become 1-year adjustable.
I Index: market rate which provides the basis for adjustment to the interest rate on
the ARM
I The contract rate on the ARM equals the index plus a fixed margin.
I Examples include constant maturity treasury index; LIBOR, and SIBOR (SORA).

ARM Terms
I Margin: the amount, in basis points, added to the index to arrive at the contract
rate for the loan
I Ranges from 150 to 275 basis points
I Once stated in the mortgage contract, the margin cannot change for that loan.
I Example: if the index is 6% and the margin is 150 basis points, the rate on the loan
will be 7.5%.
I Interest rate caps: periodic adjustment rate cap and life-of-loan rate cap
I The periodic adjustment rate cap places a limit on how much the contract rate can
change at each date of adjustment.
I The life-of-loan rate cap establishes a ceiling that the contract rate can never exceed.

ARM Terms
ARM rates are generally lower than 15-year or 30-year FRM rates.
ARM helps the lender to reduce interest rate risk, hence the lender is willing to accept
a lower rate of return.
Rate varies over time and across loan types mainly due to differences in index.
Index
ARMs should be priced more like short-term loans.

I 1-year ARM rates reset every 12 months
FRMs should be priced more like term loans.

I 30-year horizon for 30-year mortgages?
I 20-year horizon for 20-year mortgages?
I No. . .
I The median homeowner moves after 6 to 7 years
I If there was no refinance risk, price FRMs more like 7-year term loans

Index
Yield Curve

ARM Terms
Index
Treasury rates As of March 2004

Index
Treasury rates as of February 2006

Margin
The periodic rate on an ARM is typically set as a fixed spread over an index or a
benchmark rate.
For example, the contract rate on an ARM can be set at 275 basis points over the
one-year Treasury rate.
I To find the rate on the loan, we look up the one-year Treasury rate (say 1.5% in
2004) and add 275 basis points to it to get the annual contract rate of 4.25%.
I The monthly periodic rate is set to 4.25/12 for 12 months.
I At the end of the 12 months, the contract rate is “reset” to 275 basis points
above the then-current one-year Treasury rate.
I If the Treasury rate rises to 4.5% (as in 2006) the mortgage contract rate could
rise to 7.25%.

Margin
I Loan amount: $100,000
I Maturity: 360 months
I Rate change interval: 1 year
I Margin over index: 2.50

Margin
Initial payment: Payment in the 2nd year:
I PV=-100,000 I PV=-100,000
I N = 360 I N = 360
I i = 7.25/12 I i = 7.25/12
I PMT = ? I PMT = ?
I PMT = 682.1763 I PMT = 682.1763
I N’ = 348
I PV’ = ?
I UPB = 99,032.1433
I I’ = 9.50/12
I PMT’ = ?
I PMT’ = 837.8827
Rate Caps
In order to provide some protection for borrowers, ARMs provide limits on how much
the loan rate and/or payment can change.
I Lifetime limits or caps on how high the interest rate can rise are common
I Life caps are often in the 5% to 6% (500 to 600 basis points) range
I Periodic rate caps limit how much the rate can change at any one time
I Periodic caps are often in the 1% to 2% (100 to 200 basis points) range
Caps allow for a sharing of interest rate risk between lenders and borrowers.

Rate Caps
When an ARM has rate caps, you can think of the rate adjustment process as having
three steps:
Step 1: Calculate the rate as if there were no caps: Index + Margin.
Step 2: See if the rate calculated in Step 1 exceeds the lifetime cap on the loan. If it
does, reduce the rate obtained in Step 1 to the maximum rate allowed by the lifetime
cap.
Step 3: See if the change from the current rate to the rate calculated in Step 2
exceeds the periodic limit. If it does, set the rate equal to the old rate plus (or minus)
the periodic limit.

Rate Caps
Lifetime Cap = 500 BP over original loan rate

Periodic Cap = +/- 200 BP over previous period loan rate

Rate Caps


Rate Caps


Rate Caps
What’s the effect of rate caps on ARM prices (assume normal market interest rate
fluctuations - s.d. = 30 bp)?

Teaser Rates
ARM rates adjust over the life of the loan based on a formula of index + margin,
subject to caps. However, the initial loan rate is not constrained by any specific
formula.
I In one earlier example, we have set the initial rate to the current index rate plus
the margin.
I In fact, it is often the case that lenders offer initial rates below the index +
margin.
I These lower initial rates are typically called “Teaser Rates.”
I Lower the borrower’s initial monthly payment
I Lower the lifetime cap if it is specified as the initial rate plus a maximum % increase
in the loan rate
I Cause future payments to increase at the first reset of the loan even if index values
do not change

Teaser Rates


Teaser Rates
How do teaser rates affect ARM prices?

Teaser Rates

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Real Estate Economics Mortgage Instruments: Jing Li Singapore Management University

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Real Estate Economics

Singapore Management University

Jing Li (SMU) Mortgage Instruments 1/70

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From Future Value:

PMT PMT PMT

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Present Value of Interest Factor (PVIF):

Present Value Interest Factor for an Annuity (PVIFA):

Mortgage Constant (MC):

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I Loan Amount (PV)

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PMT = 100, 000 × MC7.5,30

= 100, 000 × .0069921

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Keystrokes for Payment Calculation

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Annual Compound Monthly Compound

N = 360 months N = 25 ∗ 12 = 300months

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i = 6/12 = 0.5 N = 30 ∗ 12 = 360

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12 months after origination, the remaining portion of PV is . . .

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N = 360 − 12 = 348 = of payments remaining

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Step 1: Calculate PMT based on original loan terms

Step 2: Determine the outstanding balance after 1 payment

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Loan amortization schedule for a 8% 30 Year FRM

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Loan amortization schedule for a 8% 30 Year FRM

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What is the true cost of the loan to the borrower?

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Step 2: Determine the net amount of cash the borrower receives

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Step 3: Now calculate the value of i when PMT = 733.76,

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Calculate the remaining balance given:

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Using FV = 95,069.26 we now solve for the periodic discount rate i

Calculate r, the true annual nominal rate, by multiplying by 12.

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Prepayment or refinancing is often triggered by two factors

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When interest rate drops

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To minimize the incidence of prepayment, banks often impose prepayment penalties on

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Prepayment penalty: $2,431

Refinancing at the end of the 7th year:

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