Question

The Jimmyfamily have just purchased a house with a sale price of $800,000 and have made a down payment of 20% othe sale price. The balance is nanced through bank loan. They can amortize the balance at 6.5% per annum for 25 years, by making monthly payments. Calculate: i) the payment at the end of each month ii) the total interest payments on this loan amount iii) after 20 years, Jimmy family's equity value

Answer 1

Answer:

the payment at the end of each month

Answer 2

i) EMI = (p x r x (1 + r)^n) ÷ ((1 + r)^n -1)

Rate of interest is 6.5% per annum so monthly rate is 6.5% ÷ 12 = 0.54%

= 6,40,000 x 0.54% x {(1 + 0.54%)^300 ÷ ((1 + 0.54%)^300 -1)}

= 4,321.33  

Payment at the end of each month = 4,321.33

ii) Total interest payment = (4,321.33 x 300) – 6,40,000

= 6,56,397.75

iii) Principle due after 20 years = 2,20857.26

Purchase Price of property = 8,00,000

Equity Value = Market value of property – loan outstanding on that property

Equity Value assuming that Market Vale = Purchase Value

= 8,00,000 - 2,20857.26

= 5,79,142.74