sample assessment 1 task 3  working out the monthly mortgage repayments
ted_holmes
Registered Posts: 14
hi, I'm having a bit of a slow moment, and cant remember how to work out the monthly repayment figure for this task 3 question.
It says
In the last few months, the company have taken out a mortgage on their premises.
Their premises cost £6,000,000 and the mortgage was 80% loan to value. Their mortgage is for a 20 year period and interest is charged on the initial balance at 3.5% per annum. Payments are made on a monthly basis.
The question you are asked to fill in the cash budget, and in the answers, it gives the value as £34,000.
I'm not getting that, and the book doesn't tell you how to get it either.
HELP!!!
Thanks
It says
In the last few months, the company have taken out a mortgage on their premises.
Their premises cost £6,000,000 and the mortgage was 80% loan to value. Their mortgage is for a 20 year period and interest is charged on the initial balance at 3.5% per annum. Payments are made on a monthly basis.
The question you are asked to fill in the cash budget, and in the answers, it gives the value as £34,000.
I'm not getting that, and the book doesn't tell you how to get it either.
HELP!!!
Thanks
0
Comments

Hi,
So to calculate the answer it is:
£6,000,000 x 3.5% = £210,000 interest per year. The total interest is then £4,200,000 (20 years). Add this to the mortgage value of £6,000,000 to get £10,200,000.
As it is 80% Loan to Value you then do £10,200,000 X 80% = £8,160,000.
Divide this figure by 20 years and 12 months to get £34,000.
I hope that helps!0 
Thank you.
This is not explained in the BPP book.
And as i'm doing this one away from the classroom, it's all i have to go on.0