Question

Five years ago, Marcus bought a house. He secured a mortgage from his bank for $420,000 . The mortgage had monthly payments for 20 years with an interest rate of 6.0% compounded monthly. However, after five years, it is time to renegotiate the mortgage. Interest rates have fallen to 4.5% compounded monthly, and Marcus still intends to make monthly payments and to pay back the debt over the remaining 15 years. Please provide rough work.

a) How much were Marcus' initial monthly payments? (1 mark)

b) What is the outstanding principal on his mortgage? (1 mark)

c) How much are Marcus' new payments? (1 mark)

Answer 1

a	Initial monthly payments	$3,009.01
b	Principal repaid in 5 years	-63421.69
	Outstanding principal	356578.31
c	New payments	$2,727.80

Workings

Book1 - Excel _ Sign in Sign in File Home Insert Page Layout Formulas Data Review View Help Il me what you want to do = = der ab General Calibri BI U - 11 - A À A - Insert Delete- Format Paste Conditional Format as Cell Formatting Table Styles Styles Sort & Finc Filter - Sele Editing Clipboard F Font Alignment Number Cells A1 1. a Initial monthly payments =PMT(6%/12,20*12,-420000) 2 3 4 b Principal repaid in 5 years Outstanding principal =CUMPRINC(6%/12,20*12,420000,1,5*12,0) =420000+C4 New payments =PMT(4.5%/12, 15*12,-C5)