# assessment 1 - task 3 mortgage payment? How?!

Registered Posts: 23
Can anyone please kindly explain how AAT have got to the mortgage monthly payment of £34000? I cannot seem to understand how that is the amount. I thought it was 20700!

• AAT Student Posts: 24
£6,000,000 x 3.5% = £210,000 = interest per year.
£210,000 x 20 = £4,200,000 = total interest.
£4,200,000 + £6,000,000 = £10,200,000 = total amount of loan.
£10,200,000 x 80% = £8,160,000 = mortgage 80% of loan.
£8,160,000 / 20 = £408,000 per annum.
£408,000 / 12 = £34,000 per month.
• Registered Posts: 23
> @kellypreston said:
> £6,000,000 x 3.5% = £210,000 = interest per year.
> £210,000 x 20 = £4,200,000 = total interest.
> £4,200,000 + £6,000,000 = £10,200,000 = total amount of loan.
> £10,200,000 x 80% = £8,160,000 = mortgage 80% of loan.
> £8,160,000 / 20 = £408,000 per annum.
> £408,000 / 12 = £34,000 per month.

Thanks so much!
• Registered Posts: 34
> @kellypreston said:
> £6,000,000 x 3.5% = £210,000 = interest per year.
> £210,000 x 20 = £4,200,000 = total interest.
> £4,200,000 + £6,000,000 = £10,200,000 = total amount of loan.
> £10,200,000 x 80% = £8,160,000 = mortgage 80% of loan.
> £8,160,000 / 20 = £408,000 per annum.
> £408,000 / 12 = £34,000 per month.

Howcome interest is charged on the full amount if only 80% is financed via the mortgage? Assuming the other 20% is funded by other means?? Why would interest be charged on an amount not funded by the mortgage??
• AAT Student Posts: 24
"the mortgage is for a 20 year period and interest is charged on the INITIAL balance at 3.5%"
So thats why you use the full amount (6M) because that was the initial amount.

I hope this makes sense?
• Registered Posts: 34

"the mortgage is for a 20 year period and interest is charged on the INITIAL balance at 3.5%"
So thats why you use the full amount (6M) because that was the initial amount.

I hope this makes sense?

Hi.

I understand the question, however I don't think it logically makes sense. It's like if you were to purchase a car for £1,000 and you place a £200 deposit (therefore 80% LTV) and then paying interest on your money that was contributed. It's not the question that's causing confusion but the concept that you would charge interest on the other 20%. If the remaining 20% was funded by a bank overdraft then there would be the overdraft interest in addition to the mortgage interest.

Can you see where I am coming from?
• Registered Posts: 2
I also have some problems with homework tasks. I'm happy I've found this forum. before that, I've used this service when I need some assistance with research paper etc
• Registered Posts: 40
@Lucygsy Totally understand, it makes no sense at all
• Registered Posts: 2
This is why it is better to go to a broker instead of worrying about where the money came from. Or you can collect data on mortgage programs in the region yourself. Some of the information is available on the banks' websites, and some are only available after you make a phone call or visit a branch. Compare interest rates, possible mortgage repayment terms, calculate the number of overpayments, and of course, Study your finances. Yes, I agree this process is time-consuming, but if you want an answer to your question, it is worth doing it yourself or contacting Mortgage Advice Derby.
• Registered Posts: 2
edited June 6
hello
• Registered Posts: 1
edited June 6
The process is time-consuming, and you need to have patience with it.
• Registered Posts: 20
Lucygsy said:

> @kellypreston said:
> £6,000,000 x 3.5% = £210,000 = interest per year.
> £210,000 x 20 = £4,200,000 = total interest.
> £4,200,000 + £6,000,000 = £10,200,000 = total amount of loan.
> £10,200,000 x 80% = £8,160,000 = mortgage 80% of loan.
> £8,160,000 / 20 = £408,000 per annum.
> £408,000 / 12 = £34,000 per month.

Howcome interest is charged on the full amount if only 80% is financed via the mortgage? Assuming the other 20% is funded by other means?? Why would interest be charged on an amount not funded by the mortgage??

The way Kelly has calculated it is different from myself, but it comes to the same answer.....

The loan value is actually £6,000,000 x 80% = £4,800,000
Making annual interest £4,800,000 x 3.5% = £168,000
Total interest £168,000 x 20 = £3,360,000
Total loan £3,360,000 + £4,800,000 = £8,160,000
Annual cost £8,160,000 / 20 = £408,000
Monthly cost £408,000 / 12 = £34,000

Doesn't matter if you calculate the 80% at the start or after you have calculated the interest charge, but this is the way I've been taught to work it out (by a mortgage advisor friend).
AAT Student Member.

Foundation - Distinction 94%