Question

You want to purchase a new condo which costs $687,000. Your plan is to pay 20 percent down in cash and finance the balance over 15 years at 4.50 percent. What will be your monthly mortgage payment?

b) What is the interest payment in month 3? Show the amortization table for three months.

Answer 1

Price = $ 687000

Loan = Price ( 1 - Down Payment Ratio )

= $ 687000 ( 1 - 0.2 0

= $ 687000 *0.8

= $ 549600

EMI :
EMI or Instalment is sum of money due as one of several equal payments for loan/ Mortgage taken today, spread over an agreed period of time.

EMI = Loan / PVAF (r%, n)
PVAF = SUm [ PVF(r%, n) ]
PVF(r%, n) = 1 / ( 1 + r)^n
r = Int rate per period
n = No. of periods

How to calculate PVAF using Excel:
=PV(Rate,NPER,-1)
Rate = Disc Rate
NPER = No.of periods

Particulars	Amount
Loan Amount	$          549,600.00
Int rate per Month	0.3750%
No. of Months	180

EMI = Loan Amount / PVAF (r%, n)
Where r is Int rate per Month & n is No. of Months
= $ 549600 / PVAF (0.0038 , 180)
= $ 549600 / 130.7201
= $ 4204.4

Loan AMortization Schedule:

Period	Opening Bal	EMI	Int	Principal Repay	Closing Outstanding
1	$          549,600.00	$         4,204.40	$            2,061.00	$            2,143.40	$             547,456.60
2	$          547,456.60	$         4,204.40	$            2,052.96	$            2,151.44	$             545,305.16
3	$          545,305.16	$         4,204.40	$            2,044.89	$            2,159.51	$             543,145.65

Int in 3rd Month is $ 2044.89