Question

John takes out a 50 000 mortgage on a home at 12 72 % convertible semiannually. He pays off the mortgage with monthly payments for 20 years, the first one due one month after the mortgage is taken out. Immediately after his 60th payment, John renegotiates the loan. He agrees to repay the remainder of the mortgage by making immediate cash payments of 10 000 and repaying the balance by means of monthly payments for ten years at 11% convertible semiannually. Find the amount of his new payment.

Answer 1

Step 1 Initial Monthly Payment
I/Y=(1+12.5%/2)^(2/12)-1
PV=-50000
FV=0
N=12*20
CPT PMT=557.05

Step 2 Loan oustanding
N=60
I/Y=(1+12.5%/2)^(2/12)-1
PMT=557.05
PV=-50000
CPT FV=45954.5183349

Step 3 New loan amount
=45954.5183349-10000
=35954.5183349

Step 4: New payment
PV=-35954.5183349
N=10*12
FV=0
I/Y=(1+11%/2)^(2/12)-1
CPT PMT=490.322094