.Mrs. and Mr. Hill purchased a detached home in North York for $1,200,000.00 with a down payment of 25%. For the remainder they signed a mortgage contract with BMO at 6.25% compounded semi-annually ( fixed rate for 5 years) and monthly payments for 25 years.

1. Find the regular monthly payment and the smaller final payment.[ 2 marks]

b. Find the total interest (total cost of financing).[1 mark]

c. Show the first three lines of the amortization schedule.[ 2 marks]

d. Find the outstanding balance after 3 years. [ 1mark]

e. Find the total principal and the total interest paid in the first 3 years. [2marks]

f. Calculate their equity after three years [ 2mark]

g Suppose they decided to pay an extra 10% of the original mortgage loan after 3 years. How much interest would this save over the life of the mortgage? [ 3marks]

h) After 3.5 years, interest rates drop to 4.52% compounded semi-annually. There is a penalty of 3 months interest on the outstanding balance for early repayment. Does it pay to refinance? [ 3marks]

i). If the penalty is based on the interest rate differential (difference between the contractual interest rate on the loan and the current interest rate) , calculated as :

Penalty = (outstanding loan balance) IRD (term remaining in payment periods)

Does it pay to refinance? [ 3marks]