Question

A $260,000 house in Hamilton was purchased with a down payment of 20.00% of its value and a 25 year mortgage was taken for the balance. The negotiated fixed interest rate was 4.75% compounded semi-annually for a five-year term, with repayments made at the end of every month.

a. Calculate the size of the monthly payments.
Round to the nearest cent
b. Complete the partial mortgage schedule for the five-year term, rounding the answers to the nearest cent.

Answer 1

To find the monthly mortgage payment for a $260,000 house with a 20% down payment and a 25-year mortgage at a 4.75% interest rate, calculate the loan amount after the down payment, then use this figure with the interest rate and loan term in a financial calculator or loan payment formula.

Step-by-step explanation:

The question pertains to the calculation of monthly payments for a mortgage. Specifically, it asks for the size of the monthly payments for a $260,000 house in Hamilton with a 20.00% down payment and a 25-year mortgage at a 4.75% interest rate, compounded semi-annually. To solve this, we have to first calculate the amount borrowed after the down payment has been made, which is 80% of the house value, and then use the loan payment formula to find the monthly payment.

Calculating the down payment:
20% of $260,000 = $52,000.
Amount borrowed = $260,000 - $52,000 = $208,000.

The monthly payment can be calculated using an amortization formula or a financial calculator, taking into account the principal amount, the interest rate converted to monthly, and the total number of payments (300 for 25 years).