A property investor bought a restored 26-unit apartment building in Truckee, Nevada in 2018 for $6,000,000 with a 75% LTV fixed rate fully amortizing first mortgage loan that had a five year lockout on prepayment. By 2022, the apartment building had increased in value to almost $10,000,000 due to the continuing growth in the local economy and falling cap rates. Because of the prepayment lockout, the investor could not refinance the first mortgage loan, so she instead found a lender who would place a $3,000,000 second mortgage loan on the property. The interest rate charged by the second mortgage lender would likely be: a. Unrelated to the risk of the second mortgage loan b. Higher than the rate on the underlying first mortgage loan c. Lower than the rate on the underlying first mortgage loan d. The same as the rate on the underlying first mortgage loan

A property investor bought a restored 26-unit apartment building in Truckee, Nevada in 2018 for $6,000,000 with a 75% LTV fixed rate fully amortizing first mortgage loan that had a five year lockout on prepayment. By 2022, the apartment building had increased in value to almost $10,000,000 due to the continuing growth in the local economy and falling cap rates. Because of the prepayment lockout, the investor could not refinance the first mortgage loan, so she instead found a lender who would place a $3,000,000 second mortgage loan on the property. The interest rate charged by the second mortgage lender would likely be: a. Unrelated to the risk of the second mortgage loan b. Higher than the rate on the underlying first mortgage loan c. Lower than the rate on the underlying first mortgage loan d. The same as the rate on the underlying first mortgage loan