All Topics / Creative Investing / Recalculating loan wrap loan repayments

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  • Profile photo of GavinGavin
    Member
    @gavin
    Join Date: 2002
    Post Count: 42

    Sorry if this is a painfully obvious question. but I have to ask it anyway. When you have an interest rate rise how do you recalculate your wrapee’s loan repayment so the loan will be paid out in the period set.

    Thanks

    Gavin

    Profile photo of WallFlowerWallFlower
    Member
    @wallflower
    Join Date: 2004
    Post Count: 205

    Gosh I don’t know ,how about…
    Take away the amount he/she has already paid from your agreed value then plug in that number into your EXCEL spreadsheet,(with the new interest rate) that you had set up in the first place and away you go…

    See told you i didn’t know, just wanted to get more posts than you[grad]

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Gavin

    Depends on the termns of your installment contract.

    If the interest rate shown on your contract is a variable rate one and the Special Conditions allow for increases then simply YES. Recalculate and advise the wrappee of the new repayment.

    If it is a fixed rate then NO. Lets hope if you have offered this option then you have fixed your own rate of interest.

    Cheers Richard
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    Profile photo of FWFW
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    @fw
    Join Date: 2002
    Post Count: 478

    Gavin
    I just look at the whole loan and calculate what the payment would have been from the start at the new interest rate. This is then the new payment.

    Keep smiling
    Felicity 8-)

    Profile photo of GavinGavin
    Member
    @gavin
    Join Date: 2002
    Post Count: 42

    Felicity,

    If I understand you correctly, my wrapee owed $32,000 at the start of her loan over 25yrs at a rate of 8.56% which worked out at $119.05 per fortnight. 1 yr on and she currently owes $30,786.36 and after the interest rise she is getting charged 9.07%. So you would work out the repayments on the loan of $32,000 at 9.07% over 25 yrs = $124.17 per fortnight.
    Is this correct?

    Thanks Gavin

    Profile photo of lozza123lozza123
    Member
    @lozza123
    Join Date: 2003
    Post Count: 81

    I would have thought you just base it on the balance owing x new rate x no. of years remaining. Is that not correct?

    * Also – quick question — if you have fixed the rate for your wrappees (based on the fixed rate you can currently get, plus say 2%) are you then required to fix your rate too, or can you leave yours variable?

    Thanks

    Lozza [biggrin]

    Profile photo of Modo Project BuildersModo Project Builders
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    @richardcasley
    Join Date: 2004
    Post Count: 2

    Gavin, I’m happy to answer your question verbally.
    If you need a thorough answer call my mobile and I’ll call you back.

    Cheers,
    Rich
    0414 395 672.

    Modo Project Builders | Modo Project Builders Pty Ltd
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    Profile photo of siaccisiacci
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    @siacci
    Join Date: 2003
    Post Count: 53

    I do the calculation on the original loan amount not the amount owing also. Thats how the bank does mine to them so thats how I do it for my wrap clients.

    Dave

    Profile photo of FWFW
    Member
    @fw
    Join Date: 2002
    Post Count: 478

    Yes, Gavin, that’s how it works. It’s a heck of a lot simpler than trying to calculate exactly how much time remaining etc.

    Keep smiling
    Felicity 8-)

    Profile photo of GavinGavin
    Member
    @gavin
    Join Date: 2002
    Post Count: 42

    Thank you everybody for your help.

    Regards,

    Gavin

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