frankfterhours
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PROJECT: CONTRACTION OF A LOAN REPAYMENT SCHEDULE FOR A HOUSE MORTGAGE
The mortgage, of UGX 1,400,000,000, has a term of 40 years. For the first 2 years, no repayments are made, although interest still accrues on the loan. Interest-only repayments are due from this point until the end of the fourth year. After the end of the fourth year, and up to the end of the term, level repayments are due, set at a level such that the mortgage will be repaid in full at the end of the 40-year term.
All repayments are made quarterly in arrears. Interest is charged at an effective rate of 6% p.a.
i) Calculate the amount of each quarterly repayment
ii) Construct the loan schedule for the mortgage.
iii) Suppose the interest rate increases to 8% in the last 20 years of the loan, show how this change will affect the loan repayment schedule.
The conditions of the loan permit borrowers to make additional payments in order to
reduce the term of the mortgage. These additional payments can be made once each
year, excluding the first two years, subject to a maximum of 20% of the outstanding capital amount, as determined at the beginning of each year of payment. The original
repayments, including the repayments in the first 10 years, will not change but the term of the mortgage will reduce.
The original repayment schedule will remain unchanged except for the term.
Mr Mubiru decides to make additional payments to reduce the term of the mortgage as much as possible.
iv) Determine the shortest possible term that can be achieved in this way.
The mortgage, of UGX 1,400,000,000, has a term of 40 years. For the first 2 years, no repayments are made, although interest still accrues on the loan. Interest-only repayments are due from this point until the end of the fourth year. After the end of the fourth year, and up to the end of the term, level repayments are due, set at a level such that the mortgage will be repaid in full at the end of the 40-year term.
All repayments are made quarterly in arrears. Interest is charged at an effective rate of 6% p.a.
i) Calculate the amount of each quarterly repayment
ii) Construct the loan schedule for the mortgage.
iii) Suppose the interest rate increases to 8% in the last 20 years of the loan, show how this change will affect the loan repayment schedule.
The conditions of the loan permit borrowers to make additional payments in order to
reduce the term of the mortgage. These additional payments can be made once each
year, excluding the first two years, subject to a maximum of 20% of the outstanding capital amount, as determined at the beginning of each year of payment. The original
repayments, including the repayments in the first 10 years, will not change but the term of the mortgage will reduce.
The original repayment schedule will remain unchanged except for the term.
Mr Mubiru decides to make additional payments to reduce the term of the mortgage as much as possible.
iv) Determine the shortest possible term that can be achieved in this way.
