You have set your sights on a house in an up and coming Sydney suburb that is selling for $650,000. You are very excited about the prospects of buying this house and negotiate a 25-year mortgage with 20% down and 5.2% p.a. interest rate, compounded monthly.

B1. What will be the amount of your monthly payments?

B2. For each month for the duration of your mortgage calculate how much of your monthly payment goes to principal re-payment and how much of it is interest. Plot a graph showing a breakdown of your periodic payment into principal repayment and interest. What percentage of your monthly payment on the 36^th month of the mortgage contract goes towards repayment of the principal?

B3. After how long will the principal outstanding be reduced by a half (i.e., equal to half of the initial loan amount)?

B4. What is the amount of total interest you will end up paying over the life of the mortgage?

Answer rating: 100% (QA)

To calculate the monthly payments we can use the formula for a fixedrate mortgage M P i1 in 1 in 1 where M is the monthly payment P is the principal a... View the full answer