Problem $1$

Below you find mortgage rate information:

Fixed Rate Mortgages$1$

Term Posted Rate $($APR$)$

$5$ year $5\mathrm{.}29\%$

$6$ year $6\mathrm{.}16\%$

$7$ year $6\mathrm{.}35\%$

$10$ year $6\mathrm{.}75\%$

Assume that the bank calculates monthly payments using $25-$year amortization regardless of the term the customer

chooses. The $$term$$ of the mortgage simply refers to the length of the period for which the interest rate is fixed.

Suppose Mike and Tanja want to buy a house in Edmonton for $$450,000.$ They have $$100,000$ in savings they can

use as a down payment and they want to borrow the rest from the bank. Assume that Mike and Tanja chose the

seven$-$year term mortgage.

a$)$ b$)$ c$)$ d$)$ e$)$ What is the monthly payment over the seven$-$year term of the mortgage?

What will be the outstanding principal balance at the end of the mortgage term of seven years?

How much do they still owe three years after they took out this mortgage $($i$.$e$.,$ immediately after they made the

$36$th monthly payment$)?$

What is the principal portion of the $37$th mortgage payment?

What would be the bi$-$weekly payment $($they would make payments once every two weeks$)$ if they switched to

bi$-$weekly payments right after they made their $36$th monthly payment. Assume there is no penalty for switching

and that the effective interest rate remains the same. Also assume that they would make bi$-$weekly payments for

the remainder of the term, i$.$e$.,22$ years, and that a year has exactly $52$ weeks.