Calculation for loan with first year repayment holiday?

Discussion in 'Accounts & Finance' started by Pete Jackson, Jul 13, 2019.

  1. Pete Jackson

    Pete Jackson UKBF Newcomer Free Member

    3 0
    Hi.

    Can anyone advise how to calculate loan repayments for a loan with a twelve month repayment holiday for the first year?

    Loan details;
    £100,000 principal
    3% interest
    6 year term
    Monthly repayments
    First 12 months; interest-only repayment holiday

    I can calculate repayments for a standard loan OK. I am just unsure of the effect of the repayment holiday. I have been told that interest will accrue over the holiday period.

    My thoughts;
    £250 interest-only repayments for the first 12 months.
    £3,000 accrued interest during the repayment holiday.
    £103,000 principal at the beginning of the final 5 year repayment period.
    £1,850.78 monthly repayments for the final 5 years.
    £114,046.80 total payments.

    Can anyone tell me if I am correct, or correct me if I am wrong?

    Thanks.
     
    Posted: Jul 13, 2019 By: Pete Jackson Member since: Jul 13, 2019
    #1
  2. Pete Jackson

    Pete Jackson UKBF Newcomer Free Member

    3 0
    On reflection, I cannot see why interest should accrue during the twelve month repayment holiday when interest-only payments are being made. I wonder whether the accountant who advised me overlooked the interest payments.

    I will double-check - unless I have overlooked something?
     
    Posted: Jul 14, 2019 at 6:04 AM By: Pete Jackson Member since: Jul 13, 2019
    #2
  3. Scalloway

    Scalloway UKBF Legend Free Member

    14,911 3,165
    If you are paying £250 interest-only repayments for the first 12 months then the principal you are repaying is £100,000, not £103,000.
     
    Posted: Jul 14, 2019 at 8:13 AM By: Scalloway Member since: Jun 6, 2010
    #3
  4. Mark T Jones

    Mark T Jones UKBF Big Shot Full Member

    3,162 917
    Correction
     
    Posted: Jul 14, 2019 at 8:32 AM By: Mark T Jones Member since: Nov 4, 2015
    #4
  5. Maxwell83

    Maxwell83 UKBF Regular Free Member

    546 124
    If you pay off the interest accrued over the first year, then you start year 2 in the same position as starting a new 5 year loan - so calcs for the 2nd year onwards should be the same as a std 5 yr loan.
     
    Posted: Jul 14, 2019 at 4:14 PM By: Maxwell83 Member since: Aug 4, 2012
    #5
  6. Pete Jackson

    Pete Jackson UKBF Newcomer Free Member

    3 0
    Thank you for the advice; it is much appreciated.
     
    Posted: Jul 14, 2019 at 8:50 PM By: Pete Jackson Member since: Jul 13, 2019
    #6