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  • Hagsmunasamtök Heimilanna: The Homes Association - Iceland

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    An example from a model constructed in 2014 by The Homes Association, showing the projected development and cost of a typical inflation index-linked mortgage over time, compared with other types of loans and specifically with nominal rate loans which are ordinary for most other countries. The example is calculated given prevailing inflation of 4,83% in april 2013, but as shown the historical average is as high as 5,84%. Additionally this particular example shows the loan being refinanced every 8 years, leading to an ever increasing loan capital which can never be repaid.

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    2013-Iceland InflationIndexLinkedMortgage-Refinanced-8years

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    An example from a model constructed in 2014 by The Homes Association, showing the projected development and cost of a typical inflation index-linked mortgage over time, compared with other types of loans and specifically with nominal rate loans which are ordinary for most other countries. The example is calculated given prevailing inflation of 4,83% in april 2013, but as shown the historical average is as high as 5,84%. Additionally this particular example shows the loan being refinanced every 8 years, leading to an ever increasing loan capital which can never be repaid.

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    © All Rights Reserved
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    4K views1 page

    Hagsmunasamtök Heimilanna: The Homes Association - Iceland

    Uploaded by

    Hagsmunasamtök heimilanna
    An example from a model constructed in 2014 by The Homes Association, showing the projected development and cost of a typical inflation index-linked mortgage over time, compared with other types of loans and specifically with nominal rate loans which are ordinary for most other countries. The example is calculated given prevailing inflation of 4,83% in april 2013, but as shown the historical average is as high as 5,84%. Additionally this particular example shows the loan being refinanced every 8 years, leading to an ever increasing loan capital which can never be repaid.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    of 1

    Hagsmunasamtk Heimilanna

    The Homes Association - Iceland


    THE INCREDIBLE LOAN MACHINE
    A Model of Icelandic Consumer Loan Repayment Structures

    LOAN CRITERIA
    Loan to value
    Loan principal
    Stamp duty
    Borrowing fee
    Paperwork cost
    Cash disbursment
    Borrowing date
    First payment
    Loan term
    Instalments
    Invoice fee

    80% 25.000.000
    ISK 20.000.000
    1,5%
    300.000
    1,0%
    200.000
    ISK
    2.800
    ISK 19.497.200
    01/04/2013
    5/1/2013 01/05/2013
    years
    40
    #
    480
    ISK
    120

    CPI-INDEXATION
    Fixed interest rate indexed
    4,10%
    Fixed rate term
    years
    40
    Base CPI
    points
    409,9
    Inflation forecast
    pcnt.
    4,83%
    CBI inflation target rate
    2,50%
    Historical inflation average
    5,84%
    Current 12m inflation rate
    4,83%
    Wage link option begin
    01/06/2001
    Wage link option end
    01/05/2053
    Wage forecast
    7,27%
    5,84%
    NOMINAL INTEREST
    Prevailing rate
    4,10% 01/04/2013
    Fixed interest rate nominal
    4,10%
    Fixed rate term
    years
    40
    Interest option
    4,10%
    4,10%
    Interest option
    begin
    01/04/2013
    Interest option
    end
    01/05/2053
    REFINANCING MODEL
    Refinancing rate

    years

    Total repayment
    Repayment ratio
    Total credit cost
    Total cost ratio
    Annual Percentage Rate
    Remainder

    Loan type:
    ..........
    kr.
    ..........
    %
    ..........
    kr.
    ..........
    %
    APRC
    %
    kr.

    Indexed annuitet
    93.663.478
    468,32%
    74.166.278
    380,39%
    8,43%
    80.866.833

    Indexed proportional *
    83.853.004
    419,27%
    64.355.804
    330,08%
    8,86%
    43.303.833

    Nominal annuitet **
    33.839.184
    169,20%
    14.341.984
    73,56%
    3,43%
    12.238.384

    * Proportional = payments proportional to remaining principal, plus interest


    ** Nominal = nominal amounts, excluding indexation cost components (significant part of total cost)
    -- Note: before 2013, lenders have in most cases omitted indexation when providing loan price information

    Nominal proportional
    33.373.864
    166,87%
    13.876.664
    71,17%
    3,84%
    6.553.568

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