Sarah is planning to purchase a new house. To purchase the house, she will need to borrow $550,000 from the bank. The loan term is 30 years and the terms of the contract require monthly end of period payments (including interest and principle). The current interest rate offered by her bank is 3.5% per annum for a variable rate mortgage loan. If Sarah borrows the money from her bank and the interest rate decreases by 0.5% three years after the mortgage started, what would the new monthly repayment be?

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Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.