Question

You have had your offer of $1.2 million on a house accepted and have arranged with the bank for a 30 year mortgage equal to 90% of the sale price. The agreement calls for monthly repayments and the bank will charge a nominal annual interest rate of 6%.

(a) If the first payment is due one month after the loan is received, calculate the amount for the regular instalments.

(b) After the 60th payment the interest rate decreases to 5% p.a. Assume you have decided to maintain the monthly repayment. If you choose to pay out the mortgage after the 60th payment, what is the payout figure?

(c) If you choose not to pay out the mortgage after the 60th payment, how much longer will it take you to pay out the loan?