Question

The mortgage on your house in Winnipeg is 5 years old. It required monthly payments of $ 1 comma 390 ​, had an original term of 30​ years, and had an interest rate of 10 % ​(APR with​ semi-annual compounding). In the intervening 5​ years, interest rates have​ fallen, housing prices in the Unite States have​ fallen, and you have decided to retire to Florida. You have decided to sell your house in Winnipeg and use your equity for the down payment on a condo in Florida. You will roll over the outstanding balance of your old mortgage into a new mortgage in Florida. The new mortgage has a​ 30-year term, requires monthly​ payments, and has an interest rate of 5.625 % ​(APR with monthly compounding which is typical for U.S.​ mortgages). ​(Note: Be careful not to round any intermediate steps less than six decimal​ places.) a. What monthly repayments will be required with the new​ loan? b. If you still want to pay off the mortgage in 25​ years, what monthly payment should you make on your new​ mortgage? c. Suppose you are willing to continue making monthly payments of $ 1 comma 390 . How long will it take you to pay off the new​ mortgage? d. Suppose you are willing to continue making monthly payments of $ 1 comma 390 and want to pay off the mortgage in 25 years. How much additional cash can you borrow today as part of the new​ financing?

Answer 1

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