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You have decided to become a student landlord and plan to buy a house  for $920,000. You...

You have decided to become a student landlord and plan to buy a house  for $920,000. You parents have agreed to supply $200,000 to be used as a down payment, leaving $720,000 to be financed by means of a mortgage. The mortgage broker has quoted 5.25% quoted rate based on a 25-year amortization, which will be compounded semi-annually in accordance with Canadian law.

Required:

a) What would be the amount of monthly payments on the mortgage?

b) What would be the principal outstanding after five (5) years?

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Answer #1

Given rate is 5.25% compounded semiannually

Effective annual rate = (1+0.0525/2)^2 -1 = 5.3189%

Rate per month = 5.3189/12 = 0.4432%

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