An individual intends to take out a mortgage of £300,000 to purchase a new house. The mortgage is to be repaid by level

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An Individual Intends To Take Out A Mortgage Of 300 000 To Purchase A New House The Mortgage Is To Be Repaid By Level 1 (47.6 KiB) Viewed 39 times

An individual intends to take out a mortgage of £300,000 to purchase a new house. The mortgage is to be repaid by level instalments payable monthly in arrears over 25 years. On the day of purchase, the following costs will also be incurred: • a property survey fee of £500 a mortgage set-up fee of £250 Legal fees of £1,000 • And stamp duty of 3% of the purchase price (in excess of £100,000) Bank B will pay all of these initial costs on behalf of the individual, but will also charge a higher effective interest rate of 4.75% per annum. a. Calculate the amount of the monthly repayment in this case. b. If the individual has no savings at the date of purchase and, thus, would have to borrow addition funds to cover these initial costs, explain why borrowing from the Bank is likely to be the more cost-effective option. c. However, if the individual has savings to cover these initial costs, use Excel (or other similar software) to calculate the rate of return that must be earned over the 25-year repayment period on the monthly