You want to purchase a house for $500,000. You will make a down payment of 10 percent
Question:
You want to purchase a house for $500,000. You will make a down payment of 10 percent of the value of the house and take out a mortgage for the remaining balance. A bank has offered you a 20-year mortgage at 4 percent APR compounded semiannually.
a) Calculate your monthly payment.
b) Prepare an amortization schedule for the first two months under the terms specified above.
Beginning Total Interest Principal Ending
Month Balance Payment Paid Paid Balance
1
2
c) If you make regular monthly payments according to the terms specified above, how much money will you owe on your mortgage after 8 years?
d) Now assume that instead of monthly payments specified in part (a), you decide to set-up your original mortgage with bi-weekly payments. How much will be your bi-weekly payment?
Financial Markets and Institutions
ISBN: 978-0077861667
6th edition
Authors: Anthony Saunders, Marcia Cornett