30.11.2013, 18:47
hi im revising for an exam soon to come, and im stuck on this question that iv found, could anyone help me out?
case study:
A couple are hoping to buy a house in 5 years time. They have managed to save Ј15,000 between them and they both intend to invest 5,100 each year in a cash ISA.
Their projections for a mortgage are based on the market being similar to now and that they will be able to borrow Ј210,000 at a nominal interest rate of 6% per annum, compounded monthly. They also expect to be able to provide a 25% deposit towards a total purchase price of Ј280,000.
Question:
An alternative they are considering is to take out a 25 year interest only mortgage at 6% per annum and, five years later, start a 20 year savings plan at 4.2% per annum (compounded monthly) to raise the Ј210,000 required at the end of the term. What would be the monthly payments for -
(i) years 1 – 5
(ii) years 6 – 25?
case study:
A couple are hoping to buy a house in 5 years time. They have managed to save Ј15,000 between them and they both intend to invest 5,100 each year in a cash ISA.
Their projections for a mortgage are based on the market being similar to now and that they will be able to borrow Ј210,000 at a nominal interest rate of 6% per annum, compounded monthly. They also expect to be able to provide a 25% deposit towards a total purchase price of Ј280,000.
Question:
An alternative they are considering is to take out a 25 year interest only mortgage at 6% per annum and, five years later, start a 20 year savings plan at 4.2% per annum (compounded monthly) to raise the Ј210,000 required at the end of the term. What would be the monthly payments for -
(i) years 1 – 5
(ii) years 6 – 25?
