I have recently bought “From 0 to 130 Properties in 3.5 years” and i love it. I read it in a day (couldnt put it down) and now cant wait to find my first positive cashflow property. I have a question though.
On page 83 there is a table that works out the CoCR for the caravan park example. It shows that the annual loan repayments are $7109. The loan is $84000 @ 7% interest and weekly repayments. Unless i’m mistaken, 7% of $84000 is $5880, not $7109. I know that Steve was an accountant so im assuming that it is me who is wrong (or maybe Steve wasnt a very good accountant [tongue]) so could someone please explain to me how this works.
Also, what is the difference between Interest only and Principal and Interest loans?
From what i understand Principal and Interest is where you pay the interest and a little bit of the principal each repayment, and Interest only is where you only pay the interest. Is that correct? For Interest only do you pay the principal in one hit when the loan time is up?PS. This is my first post at this forum so Hello Everyone! [biggrin] From what ive seen of it so far it seems like an excellent place to find advice and help others [smiling]
Hi Ashy, and welcome to the forum,
Steve’s calculations are based on P&I repayments over 25 years,
You’re understanding of P&I and interest only repayments are largely correct,
An interest only loan is usually for a specified period, e.g., 10- 15 years, at the end of the interest only period the loan reverts to P&I or, a new I.O loan is created or, the loan is paid down,
I hope this helps,Regards
Steven
Mortgage Broker[email protected]
http://www.mobilemortgagemarket.com.au
Ph:1800 820 500
VICTORIAPLEASE note comments made should NOT be taken as specific taxation, financial, legal or investment advice. Please seek professional, specific advice.
Thank you for explaining that Steven.
How then did Steve calculate the annual loan repayments? As the principal decreases the interest portion of each repayment will decrease and the principal portion will increase. This seems familiar somehow, im sure we did this in maths B at high school but i cant remember how.Also are I.O. loans usually at a lower interest rate then P & I?
Hi Ashy,
In most cases the rate for I.O or P&I are the same,
There are many calculators available on the net that will allow you to calculate loan repayments,Below is a cut and paste of the annual table from the calculator on my web site displaying the effect of repayments of $593.69 per month on a P&I loan of $84.000 over 25 years at 7%
Year Interest Principal Balance
2004 $2,930.86 $631.28 $83,368.72
2005 $5,793.66 $1,330.62 $82,038.10
2006 $5,697.48 $1,426.80 $80,611.30
2007 $5,594.33 $1,529.95 $79,081.35
2008 $5,483.73 $1,640.55 $77,440.80
2009 $5,365.15 $1,759.13 $75,681.67
2010 $5,237.97 $1,886.31 $73,795.36
2011 $5,101.60 $2,022.68 $71,772.67
2012 $4,955.37 $2,168.91 $69,603.77
2013 $4,798.58 $2,325.69 $67,278.07
2014 $4,630.46 $2,493.82 $64,784.25
2015 $4,450.18 $2,674.10 $62,110.15
2016 $4,256.85 $2,867.42 $59,242.73
2017 $4,049.59 $3,074.69 $56,168.04
2018 $3,827.32 $3,296.96 $52,871.08
2019 $3,588.98 $3,535.30 $49,335.78
2020 $3,333.41 $3,790.87 $45,544.91
2021 $3,059.38 $4,064.90 $41,480.01
2022 $2,765.53 $4,358.75 $37,121.26
2023 $2,450.42 $4,673.85 $32,447.40
2024 $2,112.55 $5,011.72 $27,435.67
2025 $1,750.25 $5,374.03 $22,061.64
2026 $1,361.75 $5,762.53 $16,299.11
2027 $945.18 $6,179.10 $10,120.01
2028 $498.51 $6,625.77 $3,494.24
2029 $71.73 $3,490.40 $3.84Regards
Steven
Mortgage Broker[email protected]
http://www.mobilemortgagemarket.com.au
Ph:1800 820 500
VICTORIAPLEASE note comments made should NOT be taken as specific taxation, financial, legal or investment advice. Please seek professional, specific advice.
Steven,
Do you know what the actual formula is for calculating repayments on P&I loans?
All these programs and Websites that provide calculators are fine, but I’d like to know the actual formula used. I’ve tried to get this off my bank in the past and the loan people can never tell me (possibly because they don’t know themselves).
I once got some figures off NAB for a loan then plugged the same numbers into the MS Money program and got different answers (close, but not exactly the same).
GP
Hi GP,
Below is a link to an article containing information on how to calculate repayments,
I personally use the repayment calculator on my laptop; it’s so much faster,
http://www.ext.colostate.edu/pubs/farmmgt/03758.pdf
Hope this helps,
Regards
Steven
Mortgage Broker[email protected]
http://www.mobilemortgagemarket.com.au
Ph:1800 820 500
VICTORIAPLEASE note comments made should NOT be taken as specific taxation, financial, legal or investment advice. Please seek professional, specific advice.
Thanks Steven. I’ll take a look at it.
GP
Greatpig,
NAB told me for a IO loan as follows,
loan amount x days in month x interest rate divide by 36500 = monthly payment.
roboOriginally posted by robo:NAB told me for a IO loan as follows, loan amount x days in month x interest rate divide by 36500 = monthly payment.
Well they know how to make something more difficult than it is [
]. Why didn’t they just say loan x interest rate divided by 1200? And what figure would they use for the number of days in a month?IO is fairly straight forward. I’ve been trying to figure out P&I.
GP
]. Why didn’t they just say loan x interest rate divided by 1200? And what figure would they use for the number of days in a month?You must be logged in to reply to this topic. If you don't have an account, you can register here.
