Question

Happy is planning to get a loan to finance the construction of a house, worth $2,000,000 from Baclays Bank. The bank is offering loans at an interest of 10% with a repyment period of 8years. Happy has opted to repay the loan using a balloon amortisation method, and the bank allows for a balloon repayment of 30% at the end of the loan period. Given the above information, construct an amortisation table for the loan Happy intends to take.

Answer 1

Ballloon payment = 30%*$2000000 = $600000

per month rate =10%/12=0.008333

Amount of payment per month (A) is given by

A/0.008333*(1-1/1.008333^96) + 600000/1.008333^96 = 2000000

A = $26243.83

The amortisation table (with monthly payments) for the 1st 10 months and last 7 months and balloon payment of $600000 is as given below

Month	Amount outstanding at beginning of month	Interest	Payment	Balance at end of month
1	2000000	16666.67	26243.83	1990422.84
2	1990422.84	16586.86	26243.83	1980765.86
3	1980765.86	16506.38	26243.83	1971028.42
4	1971028.42	16425.24	26243.83	1961209.82
5	1961209.82	16343.42	26243.83	1951309.41
6	1951309.41	16260.91	26243.83	1941326.49
7	1941326.49	16177.72	26243.83	1931260.38
8	1931260.38	16093.84	26243.83	1921110.39
9	1921110.39	16009.25	26243.83	1910875.81
10	1910875.81	15923.97	26243.83	1900555.95
90	743871.30	6198.93	26243.83	723826.40
91	723826.40	6031.89	26243.83	703614.46
92	703614.46	5863.45	26243.83	683234.08
93	683234.08	5693.62	26243.83	662683.87
94	662683.87	5522.37	26243.83	641962.40
95	641962.40	5349.69	26243.83	621068.26
96	621068.26	5175.57	626243.83	0.00