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.

Solutions

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

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Feel free to comment if you need further assistance J

Pls rate this answer if you found it useful.

jeff jeffy answered 1 year ago

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