Please do not use the Excel method; I do not plan on using Excel. please use log
ID: 2383339 • Letter: P
Question
Please do not use the Excel method; I do not plan on using Excel. please use logic and general forumlas.. when you are writing the variables for the formulas, please make sure to be clear as to which variables are being represented in the equation.... thanks in advance
Steve and Laurie bought a house in Edmonton exactly 5 years ago. They took out a mortgage for $400,000 at that time. The mortgage had a 25-year amortization period, monthly mortgage payments, and a quoted interest rate of 8% (APR, semi-annually compounded). Steve and Laurie recently decided to buy a new house, also in Edmonton. Today they will receive payment from the buyer of their old home and make a down payment on the new house. If the old house sold for $600,000, the new one is priced at $800,000, and the down payment on the new house equals the net proceeds from the sale of their old house, how big is their new mortgage (assuming monthly mortgage payments)? (Net proceeds = Selling price of old house less Outstanding Principal Balance on the old mortgage). If the new mortgage has a quoted interest rate of 6% and a 20-year amortization period, how big are Steve and Laurie’s new monthly payments?
Explanation / Answer
Mortgage Amount = 400000 Amortization Period = 25 Years Total Months = 25*12 = 300 Interest Rate = 8% Payment Received = 600000 Total Amount amortised = 400000*5/25 = $ 80000 Balance = 400000-80000 = $ 320000 Profit = 600000-320000 = $ 280000 New House = 800000 Net Proceeds = $ 280000 Balance = 800000-280000 = $ 520000