MASSEY UNIVERSITY

Suppose that you are going to purchase a $800,000 house in Auckland with 20% deposit. The loan is fully amortised over 25 years. Interest rate is fixed at 5 percent for the first 2 years and is then subject to reset. Loan payments are made fortnightly.Calculate the fortnightly payment during the first 2 years andloan balance at the end of 2 years.Assuming that the reset rate is 7 percent at the beginning of year 3, calculate the new fortnightly mortgage payment and the percentage increase of the new payment.Suppose you have a gross income of $100,000 per annum and the bank requires the mortgage payment is no more than 30% of your gross income. Calculate the maximum mortgage loan amount you can get from the bank, assuming a loan term of 25 years, an interest rate of 5% pa and fortnightly mortgage payment.