Kate is applying to the Bank of Montreal for a mortgage of$423,500. The bank is...

Kate is applying to the Bank of Montreal for a mortgage of $423,500. The bank is quoting 2.99% semi annually. She would like to have a 25-yar amortization period and wants to make payments monthly. However, she must pay 20% down payment to avoid additional bank insurance. What will Kate’s monthly payment be?

Expert Solution

Loan amount to be taken = 423500 - Down payment

= 423500 - 423500 * 20%

= 423500 - 84700

= 338800

Semi annual interest rate is 2.99% Hence the monthly interst rate = 2.99%/6 = 0.4983%

No of months 25 Years * 12 months per year = 300 months

EMI = Loan Amount / PVAF (r%, n)
Where r is Int rate per Month & n is No. of Months
= $ 338800 / PVAF (0.005 , 300)
= $ 338800 / 155.5018
= $ 2178.75

Kate monthly payments are 2178.75

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

jeff jeffy answered 2 years ago

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