Question

In: Finance

Tom wishes to purchase a property that has been valued at $300,000. He has 25% of...

Tom wishes to purchase a property that has been valued at $300,000. He has 25% of this amount available as a cash deposit, and will require a mortgage for the remaining amount. The bank offers him a 25-year mortgage at 2% interest. Calculate his monthly repayments. Give your answer in dollars and cents.

Expert Solution

Loan amount = 300000* .75 = 225000

Time = 25* 12 = 300 month

Interest rate = 2/12 = 0.16666% per month

If the loan amount is P, rate on interest (monthly is r, and loan term is n the EMI will be

EMI = P*r[(1 +r)^n]/ [(1+ r)^n- 1]

Where,

Loan amount (P) = $225000

Time (n) = 300

Interest rate [r] = 0.166667% /period

Let's put all the values in the formula to calculate EMI

EMI = 225000*0.00166667[(1 +0.00166667)^300]/ [(1+ 0.00166667)^300- 1]

= 375.00075[(1.00166667)^300]/ [(1.00166667)^300- 1]

= 375.00075[1.6480368539]/ [1.6480368539- 1]

= 375.00075[1.6480368539]/ [0.6480368539]

= 375.00075[2.54312211409247]

= 953.67

So EMI will be $953.67

--------------------------------------------------------------------------------------------------------------------------

Feel free to comment if you need further assistance J

Pls rate this answer if you found it useful.

jeff jeffy answered 2 years ago

Tom wants to purchase a property for $300,000. He can borrow a 80% LTV fixed-rate loan,...

Tom wants to purchase a property for $300,000. He can borrow a 80% LTV fixed-rate loan, with 4.5% annual interest rate and a 3% origination fee. Or, he can borrow a 90% LTV fixed-rate loan, with 5.5% annual interest rate, and a 3% origination fee. Both loans have a 30 year amortization period. If he plans to prepay the loan at the end of 3rd year, what will be the incremental cost of borrowing for him to to borrow the...

An investor into the real estate mentioned to you that he/she wishes to purchase a property...

An investor into the real estate mentioned to you that he/she wishes to purchase a property for investment upon his/her graduation in about 3 years time. The property value he/she can afford are in the range of rm300,000. Evaluate the above in the perspective of time value of money.

A mortgage loan of $200,000 has just been made on a property valued at $250,000. The...

A mortgage loan of $200,000 has just been made on a property valued at $250,000. The interest rate is 5% with 2 points with a 10 year balloon. Monthly amortization payments are based on a 30 year maturity. The mortgage also carries a 2% prepayment penalty. a. What is the indicated loan-to-value ratio? b. What is the monthly mortgage payment? c. How much interest is paid in the fourth year? d. What is the dollar amount of the balloon payment?...

1. Tom has $300,000 to invest. He invests his money into four stocks with the following...

1. Tom has $300,000 to invest. He invests his money into four stocks with the following betas: Stock A= $120,000 Beta: 2.15 Stock B= $75,000 Beta: 0.40 Stock C= $50,000 Beta: 0.85 Stock D= $55,000 Beta: 0.66 The risk-free rate is 4%, and the expected market return is 9% Compute the required rate of return on the portfolio.

You are considering two loans to finance a purchase of a property valued at $100,000 at...

You are considering two loans to finance a purchase of a property valued at $100,000 at LTV of 70%. Loan A is a fixed-rate mortgage with amortization term of 30 years. The annual interest rate is 8% and the payments are made monthly. Prepayment penalty if the loan is paid off within first 10 years is 3%. Loan B is an adjustable rate mortgage with an amortization term of 30 years. The initial rate is 4%, but the rate is...

John is currently 25 years old. He has $10,000 saved up and wishes to deposit this...

John is currently 25 years old. He has $10,000 saved up and wishes to deposit this into a savings account which pays him J12 = 6% p.a. He also wishes to deposit $X every month into that account so that when he retires at 55, he can withdraw $2000 every month end to support his retirement. He expects to live up till 70 years. How much should he deposit every month into his account?

When Tom retires at age 67, he wishes to withdraw all his superannuation as a lump...

When Tom retires at age 67, he wishes to withdraw all his superannuation as a lump sum and use that to invest in an annuity that pays him $80,000 each year for 15 years. This $80,000 income comprises of part principal draw down on the lump sum he invested and part interest he earns from the return on his lump sum. Tom can earn a 3% p.a. return on his lump sum investment. By the final year, he will have...

Tom wishes to buy another boat in five years that presently costs $150,000. He expects the...

Tom wishes to buy another boat in five years that presently costs $150,000. He expects the cost of the boat to increase due to inflation by 3% per year for the next two years and 5% per year the following three years. He also wants to spend $75,000 per year for 6 years beginning at the end of 12 years from today. How much must he save each year for the next 5 years if he can earn 6% on...

Your client has been given a trust fund valued at $1.18 million. He cannot access the...

Your client has been given a trust fund valued at $1.18 million. He cannot access the money until he turns 65 years old, which is in 25 years. At that time, he can withdraw $21,000 per month. If the trust fund is invested at a 4.5 percent rate, compounded monthly, how many months will it last your client once he starts to withdraw the money? (Do not round intermediate calculations and round your final answer to 2 decimal places.) Number...

Tom earned $50,000 as self employed carpenter. He is single, lives alone, and has been purchasing...

Tom earned $50,000 as self employed carpenter. He is single, lives alone, and has been purchasing his health insurance through the marketplace as required under the affordable care act. Tom comes in to have his 2018 taxes prepared in January of 2019, and tells you that he heard that the individual mandate has been repealed, and that he cancelled his health insurance coverage in March of 2018, as he is healthy and no longer wished to pay the premium ....