1 / 6

RBC: Cash Back Mortgage

RBC: Cash Back Mortgage. Available on a Variety of Terms Cashback is available on fixed rate mortgages with terms of 4, 5 or 7 years. And the amount of money you receive is based on the size and term of your mortgage - up to 7% of its value. .

brianne
Download Presentation

RBC: Cash Back Mortgage

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. RBC: Cash Back Mortgage Available on a Variety of Terms Cashback is available on fixed rate mortgages with terms of 4, 5 or 7 years. And the amount of money you receive is based on the size and term of your mortgage - up to 7% of its value. Source: http://www.rbcroyalbank.com/RBC:RCn5mo71A8QAAypuvLU/products/mortgages/cashback.html

  2. Cash back Mortgage $100,000 5 year term 25 year amortization 1% cash back on drawdown date 7% APR Conventional Mortgage $100,000 5 year term 25 year amortization 0 cash back on drawdown date 6% APR RBC: Cash Back Mortgage Assumptions

  3. RBC: Cash Back Mortgage • To analyze this, we first calculate the correct monthly interest rate for each type (cash back & conventional) All calculations are shown using keystrokes for the HP 10B calculator

  4. RBC: Cash Back Mortgage Now calculate the monthly payments for each alternative: Cash back Mortgage Conventional Mortgage 1 2nd P/Y (1 Pay/Year) 100,000 PV 0 FV 25 x 12 = N 0.5750 I PMT $700.42 1 2nd P/Y (1 Pay/Year) 100,000 PV 0 FV 25 x 12 = N 0.4939 I PMT $639.81

  5. RBC: Cash Back Mortgage Now calculate the balance outstanding at the end of the five year fixed rate term for each type of mortgage: Cash back Mortgage Conventional Mortgage First calculate the payment, then: 60 Input 2nd Amort = = = $91,044.59 First calculate the payment, then: 60 Input 2nd Amort = = = $89,836.71

  6. RBC: Cash Back Mortgage • We can now calculate the implicit interest rate charged by the bank for the cash back option. • Calculate the difference in monthly payments • Calculate the difference in balance outstanding at the end of the five year fixed term • Calculate the implicit interest rate 1 2nd P/Y (1 Pay/Year) 1,000 PV 1,207.88 +/- FV 60.61 +/- PMT 60 N I -?

More Related