Problem
You want to buy a condominium in downtown Clayton for $500,000 and you plan to make 25% down payment. Your bank agreed to provide you a 20-year mortgage for the rest of the cost of this property. The interest rate they offered you is 4.20% pa.
1. How much will your mortgage payments be every month?
2. You made your mortgage payments for the first five years. At the end ofthe fifth year, you asked your bank whether you could make a one-time payment of $30,000 or not {You effectively have a new mortgage with a 15-year tenor at the end of year 5} and they accepted your one-time payment. How much will your new mortgage payments be under these circumstances? (Note: You are still going to make mortgage payments for the next 15 years and the interest rate did not change}
3. If you want your monthly payments to go down to $1,800 per month in the next 15 years, how much should your one-time payment be?