Question

Assuming you have graduated and have been working for several years. You are planning to buy a double-storey link house in Bukit Mahkota built by the IOI developer which cost RM748,000 per unit for intermediate unit. You have saved some money and plan to use them as a down payment for the house that you intend to purchase. You intend to take up a loan to finance your purchase of the house for the balance of the purchase price.

1. Calculate the amount of the down payment for the house you intend to purchase if you would like to make a 20% down payment.

2. Calculate the amount of the loan you need to borrow from a financial institution.

3. You intend to take up a loan for twenty years. Calculate your monthly installment if the bank charges you an interest rate of 4.5% per annum.

4. After five years of buying the property, you decide to assess the cost of servicing the loan.

1. In Ringgit terms, how much have you paid the lender (bank)?

2. How much do you still owe on the property?

3. How much interest have you paid to the lender?

4. Fill up the following table for five years.

Month End	Beginning Principal	Annuity Payment	Interest Payment	Principal Payment	Ending Principal
1
2
:
:
60

Answer 1

PartI

Initial cost was 748,000

Down payment requirement = 20%

Down payment = 20% of 748000 = 149600

Part II

Initial cost was 748,000

Down payment = 20% of 748000 = 149600

So Loan Amount= Initial cost – Down payment = 598400

Loan = 598400

Part III

Loan period = 20 years

Rate % 4.5%

So

Monthly Amortization payments

Monthly payment = P*(i/m)   / ( 1- (1+i/m) ^–mt

Where p = principal

I = interest rate

M= no of compounding

T = time

Monthly payment = 598400 * (0.045/12) /(1-(1+0.045/12)^-20*12 = $ 3785.77

Part IV

After 5 years

Total number of instalments paid to bank = 5*12 = 60

Total amount Paid to bank = 60*3785.77 = 227,146.43

Still owed principal in property= 494876.8

Interest paid to lender 123623.2

Loan Table