# Math Help - Interest Only Loan

1. ## Interest Only Loan

Hey guys, desperately need some assistance with the following, would be much appreciated.

Interest Only Loan, 10 year term, 7.5%pa comp monthly i, $50,000 principle Monthly repayments are$322.92

I need to calculate what the monthly repayment would be if the interest rate rose by 3% to 10.75%pa at the 5 year mark.

Am I right to assume discounting?
Any help would be great, cheers!

2. Why is that tricky? You need the balance at the 5 year mark. Since you are paying interest only, the balance doesn't change from month to month. All you really need is the ratio of the interest rates.

322.92*(10.75/7.75) = ??

3. ## re

I have attempted the question again.

Am I right to find the outstanding principle (19375.20) and then divide that by the s angle (.0089\60) = 46.33 which comes to a monthly payment of $418.17. Can anybody confirm this? 4. You must first explain to me why the Outstanding Principle is not$50,000.

Iis it, or is it not, an Interest Only Loan?

5. ## re

Shouldn't I account for the fact that interest would have accrued during the period for half of the principle, despite the fact that the principle is paid upon maturity?

6. I would read the terms of the contract very carefully.