We're Open
+44 7340 9595 39
+44 20 3239 6980

# [Solved]7) How will this new monthly mortgage repayment affect their loan affordability ratio? That is, will they be facing mortg

100% Pass and No Plagiarism Guaranteed

### [Solved]7) How will this new monthly mortgage repayment affect their loan affordability ratio? That is, will they be facing mortgage stress?

Background

Kyle and Julia are considering whether or not to buy a particular property valued at \$720,000. They have \$200,000 of their own funds to commit towards the purchase and they expect to incur an additional \$50,000 in fees and taxes on the purchase itself. They are able to borrow at an interest rate of 7.20 per cent per annum with interest compounded monthly. Loan repayments would be monthly with the first payment due at the end of the first month after purchasing the property. The term of the home loan is 30 years. They both work full-time earning a combined after-tax salary of \$12,000 per month.

1. How much is the monthly mortgage payment Kyle and Julia will be required to pay for their loan?

Hint: because the interest is compounded monthly, we need to use the number of months for the mortgage loan, not the number of years in determining the regular payments to be made.  We also need to use the monthly interest rate (7.2% /12 = 0.6%)

Using the present value of an annuity formula we can rearrange the following formula to obtain the regular monthly mortgage payment PMT.

PV =   PMT

PMT =   PV /

Alternatively, you can use a financial calculator to determine PMT.

PV                  =  amountborrowed from the bank

r                      =  interest rate per month

n                     =  number of months over the entire loan period

If we select the payment key (PMT) on the financial calculator, we will know the amount of the regular monthly mortgage payments the bank requires us to pay.

2) A loan affordability ratio is equal to the monthly home loan repayment divided by a couple’s household after-tax monthly income. A key threshold for ‘mortgage stress’ is when the loan affordability ratio reaches 35%.   Will Kyle and Julia face mortgage stress at current interest rates.

3) After 1 year, the bank informs Kyle and Julia that \$564,429 is still owing on their loan. How much in total have Kyle and Julia paid in mortgage payments during the first year?

4) Of the repayments, how much of their principal has been reduced?

5) How much interest have they paid in year 1?

6) If the bank now increases interest rates from 7.20 per cent to 8.40 per cent, what will Kyle and Julia’s new monthly mortgage repayments be?

Hint: remember to use monthly interest rates. And, remember that there are only 29 years left on the loan (use months not years).

7) How will this new monthly mortgage repayment affect their loan affordability ratio?  That is, will they be facing mortgage stress?

100% Plagiarism Free & Custom Written,
Tailored to your instructions

International House, 12 Constance Street, London, United Kingdom,
E16 2DQ

## STILL NOT CONVINCED?

View our samples written by our professional writers to let you comprehend how your work is going to look like. We have categorised this into 3 categories with a few different subject domains

View Our Samples

#### We offer a £ 2999

If your assignment is plagiarised, we will give you £ 2999 in compensation

Nov,07,2018

Nov,07,2018

Nov,07,2018

### Details

• Title: [Solved]7) How will this new monthly mortgage repayment affect their loan affordability ratio? That is, will they be facing mortgage stress?
• Price: £ 119
• Post Date: 2021-10-15T13:02:32+00:00
• Category: Assignment Requirements
• No Plagiarism Guarantee
• 100% Custom Written

### Customer Reviews

[Solved]7) How will this new monthly mortgage repayment affect their loan affordability ratio? That is, will they be facing mortgage stress?
Reviews: 5

### A masterpiece of assignment by Khuzam , written on 2020-03-12

Now I am happy that I made the right decision of coming to Insta Research for help. My term paper was so technical and analytical at the same time. I got really confused about what to do but got relaxed when I was given such a humble writer. He clarified my concepts with the best explanations and discussions. I almost interacted with him on daily basis within the writing process. The best feature of this site is quick delivery as I got the work before my deadline. Additionally, the term paper is written skillfully and handled quite professionally. Now I am able to take a deep sigh of relief and thank you all for such speedy help. The quality of the work made my day.
Reviews: 5

### A masterpiece of assignment by Meredith, written on 2020-03-12

I was worried about the plagiarism ration in my dissertation. But thanks to my dedicated writer, I received 0% plagiarism in all the chapters. I owe my writer a million thanks..!