Humber/Ontario Real Estate Course 4 Exam Practice

Buyer Malone is considering a large lakefront, log home that requires a $334,000 mortgage for a $600,000 purchase. The lender offers a mortgage with a three-year term, a 15-year amortization period, and an interest rate of 7.5%. If the monthly mortgage payment factor is 9.205137, what will the monthly payments be?

1. $2,505

2. $3,075

3. $3,843

4. $5,523

The correct answer is: $2,505

To calculate the monthly mortgage payment, you can use the formula for mortgage payments: M = P[r(1 + r)^n]/[(1 + r)^n - 1] Where: M = monthly mortgage payment P = principal amount (loan amount) = $334,000 r = monthly interest rate = annual interest rate / 12 n = number of payments = term in years * 12 (since monthly payments are being calculated) First, calculate the monthly interest rate: Monthly interest rate = 7.5% / 12 = 0.075 / 12 = 0.00625 Next, determine the total number of payments: Number of payments = 3 years * 12 months = 36 months Now substitute the values into the formula: M = $334,000[0.00625(1 + 0.00625)^36]/[(1 + 0.00625)^36 - 1] Calculate the intermediate value: (1 + 0.00625)^36 = 1.275137 Plug the values back into the formula: M = $334,000[0.00625 * 1.275137] / [1.275137