Mortgage Examples

Example 1

The annual interest rate is 5% (paid half yearly) and a loan of $259000 must be repaid over 25 years. Premiums are paid in arrear.

a) Find the monthly installment if payments are made every month for 25 years

b) Find the monthly installment if payments do not start until month 7 (the first payment occurs at the end of month 7). Premiums are then paid for 24.5 years.

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Example 2

Mr Able has £60000 variable interest rate mortgage mortgage. regardless of the interest rate, he will pay annual premiums of £4000 in arrear until the loan is paid off.

a) If the interest rate remains constant at 5%, When will his loan be fully repaid?

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Annuity Examples

Example 1A savings plan allows customer to invest a level premium annually in arrears for 10 years. If the interest rate is 6% how much must be invested per year to accumulate a fund value of £20000?

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