Decreasing annuity and amortization question?
Written By: admin on December 16, 2009
One Comment
Can someone please tell me how to solve this question? I know the answer is ,049.20 but I don’t know how to get that. Thanks!
The Bandon family buys a house for 5,000 in Saskatoon. To avoid a mortgage loan insurance by CMHC (Canada Mortgage and Housing Corporation), they make a 30% down payment and amortize the remaining amount at 6.24% compounded monthly over a 30-yr period. After 200 payments, the family decides to pay off the mortgage with a lump sum payment. How much have they saved in interest charges?
Related Posts
Tags: bandon, canada mortgage and housing, canada mortgage and housing corporation, cmhc canada, family purchases, insurance, interest charges, lump sum payment, mortgage loan insurance, saskatoon, yr period
Well I wasn’t able to get the number you had but it’s close.
First find what your payment is going to be, I got $968.730470 by using n=360, i/y=6.24, p/y=12, pv=0.7(225,000), fv=0.
Next find the present of your loan with 160 payments to go since this would be the outstanding principal on the loan after the first 200 payments and the same as your lump sum payment. I got $105,048.1639 by using n=200, i/y=6.24, p/y=12, pmt =968.730470 which was calculated above, and fv=0
Next find the amount you would have paid if you paid the 160 payments at $968.730470 which turns out to be $154996.8752
Now subtract the lump sum amount from the amount you would have paid making the 160 payments and get 154996.8752-105048.1639= 49,948.7113
Now I know the numbers don’t match but this is how I would have answered the question. Hope this helps!