Ahmad is a first-time homebuyer who decides to purchase a condominium priced at \$2.5 million. To finalise the purchase, he must adhere to the following financial terms:
Downpayment: 25% of the property’s total purchase price must be paid upfront in cash.
Bank loan: the remaining amount is financed using a fixed-rate bank mortgage.
Loan terms: flat annual interest rate of 1.45% with a repayment period of 10 years.
Calculate the monthly instalment payment.[2]
To purchase the condominium, Ahmad has to pay \$4500 lawyer’s fee and Buyer’s Stamp Duty (BSD). The partially completed table shows the amount of BSD on Ahmad’s property.
| Purchase/market value (\$) | BSD rate (%) | Amount payable (\$) |
|---|
| First 180 000 | 1 | 1800 |
| Next 180 000 | 2 | 3600 |
| Next 640 000 | 3 | 19 200 |
| Next 500 000 | 4 | 20 000 |
| Next 1 500 000 | 5 | … |
| Remaining amount | 6 | … |
Calculate the total BSD on Ahmad’s condominium purchase.[2]
Calculate the total amount of money Ahmad has to pay to purchase this condominium.[1]
Ahmad rents out the whole condominium at an estimated market rental of \$4500 a month with the help of a property agent. For every two-year contract, he pays the agent a fee equivalent to one month’s rental. In addition, he pays an annual property tax based on the table below.
Non-owner-occupied residential tax rates
| Annual value (\$) | Property tax rate (%) | Property tax payable (\$) |
|---|
| First 30 000 | 12 | 3600 |
| Next 15 000 | 20 | 3000 |
| First 45 000 | – | 6600 |
| Next 15 000 | 28 | 4200 |
| First 60 000 | – | 10 800 |
| Above 60 000 | 36 | – |
Annual Value (AV) refers to the estimated gross annual rent of the property if it were rented out. Annual property tax is calculated by applying the stated rates to the relevant portions of AV.
On top of annual property tax, he pays a monthly maintenance fee of \$700.
Based on the current trend, the value of the property will appreciate at 0.9% compounded quarterly.
Ahmad plans to rent out the property for 10 years before selling it. When selling, he pays 1% of the selling price as commission to his agent and \$2500 legal fees for the transfer and other legal documents.
Ahmad says: “My monthly rent remains constant for 10 years for every two-year contract. I will make a profit of at least \$1 200 000 in 10 years.”
Using Ahmad’s assumption, justify with calculations whether he is correct.[6]