Allen plans to purchase a house in Lindfield this year, the selling price for the house is $3.8 million. He wants to borrow 80% of the total capital from the bank using a principal and interest loan and pay 30-year monthly mortgage payments. CBA bank received his loan application and provided a valuation report based on current market conditions. However, the bank valuation is conservative, stating the market value is only $3.5 million, and to lower the risk from the bank’s side, it only approves the loan with an LVR (Loan to Value Ratio) of 70% or less. Assuming that Allen wishes to borrow as much as possible from CBA bank, how much will his monthly payments be for such a mortgage? The current interest rate from CBA is 3.19% P.A. Ignore other costs.
Allen plans to purchase a house in Lindfield this year, the selling price for the house is $3.8 million. He
wants to borrow 80% of the total capital from the bank using a principal and interest loan and pay 30-year
monthly mortgage payments. CBA bank received his loan application and provided a valuation report based
on current market conditions. However, the bank valuation is conservative, stating the market value is only
$3.5 million, and to lower the risk from the bank’s side, it only approves the loan with an LVR (Loan to Value
Ratio) of 70% or less.
Assuming that Allen wishes to borrow as much as possible from CBA bank, how much will his monthly
payments be for such a mortgage? The current interest rate from CBA is 3.19% P.A. Ignore other costs.
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