Scenario

 

Customer took out an interest only mortgage with the lender they were working for, entitling them to a discount of 1.5% on the first £30,000 of their £97,500 mortgage. After further investigation it was established that the staff discount had not been applied.

 

Lender	Barclays (Central)
Mortgage	£97,500
Start Date	1st January 1996
First Payment	1st February 1996
End Date	1st May 2010
In MIRAS	Yes
Term	25 years
Discount	1.5% not given

 

Set-up one adjustment:

 

           

DisRate	1st adjustment	‘Set Loan A Balance’ adjustment on 1st January 1996 for £30,000
	2nd adjustment	Discount of 1.5% from 1st January 1996 (enter 25y for to date) for ‘Loan A’

 

Select the lender and interest rate for the ‘Barclays (central)’ and select interest only for both the actual (A) and notional (B) calculation types, entering a term of 25 years. Select ‘DisRate’ for the notional adjustment (B).

 

Comparison Screen

 

 

Observations

 

1.         The payments are lower, as expected.

 

2.         Balance is marginally different.

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Case Studies