9.1 The Case 2 Mortgage Quotation Format
Case 2 £40,000 borrowed over 20 Years
@ 11.85% p.a. — Tax Relief at 52% p.a.
The Case 2 Mortgage Quotation was as shown below. (The Case 2 Mortgage Quotation is also reproduced in Appendix 1/2.
Again, the Comparison of the Endowment Mortgage and the Repayment Mortgage is presented in a format that compares the Net Monthly Outlay, and the Projected Surplus After Loan Repaid, for each type of Mortgage.
With the Endowment Mortgage, if the assumed growth rate is achieved, the £40,000 Mortgage Loan would be repaid after 20 years and a Projected Surplus of £14,643 would be achieved After the Loan has been Repaid —— this, for a Net Monthly Outlay of £341.23. Alternatively, the Loan could be Repaid early, after 18 years —— this too, for a Net Monthly Outlay of £341.23.
With the Repayment Mortgage, the £40,000 Mortgage Loan would be repaid in 20 years and there would be NO SURPLUS —— this, for a Net Monthly Outlay of £346.71.
Having taken account of Tax Relief on Interest and Premiums, the Mortgages Comparison Presentation compares the Endowment Mortgage to the Repayment Mortgage on the basis of their Equivalent Net Monthly Outlays, their Total Net Outlays over Term, and their respective Benefits.
Again, using the knowledge of Investment Analysis we have acquired from the previous Chapters, we will apply ourselves to an objective analysis of this Mortgage Comparison Presentation.