Calculations - My Brain Hurts!

scottp_2

Hi,

I need help with some calculations.

I want to find out the payment amount needed per month to get to a specific figure after a certain amount of time.

Starting Figure: £100,000

Payment Term: 20 Years

End Figure: £200,000 (100,000*(1.035)^20) - to get £100,000 after 20 years of 3.5% inflation (the actual total is £198,978.89 but £200,000 is just a little easier to work with!)

So what I am trying to do is work out how much I need to pay, per month to achieve the final figure. Obviously just dividing 200,000 by 240 (20 Years in months) gets me the figure it would be if the payment stays the same, but I want to have the figure rise every year by 3.5% (to take into account inflation).

What are the calculations I need? If anyone wants more info then just ask, I can tell you why I need to know, but I think some people may find it boring! lol.

Thanks again!

jonathon_hart

PM me your e-mail and I can send you a spreadsheet that will do it. Alternatively there are several online calulcators that will do the job for you - they are more user friendly but you can't see the formulas so have a bit less control on them.

Jonathon

jonathon_hart

btw - you need to take into account investment growth...

scottp_2

jonathon_hart wrote: »

btw - you need to take into account investment growth...

The money will not be invested. It is not for investment in a pension scheme.

If you want me to explain waht I am doing I can do, but it will take me a while to write it.

Thanks!!:money:

jonathon_hart

I think you will need to get the best answer. I automatically assumed it would be for a pension as this is the pension board....

scottp_2

Yes sorry, as its to do with something for my dad when he retires, I thought it would be best in here.

My dad has some land valued at around £100,000. He wanted to build a house on the land and then sell it after a few years, which he should make around £30,000 profit as well as the £100,000 for the land. However, he will struggle to finance the build (he is self employed and times have not been very good, and won't be for a long time) so I have been trying to come up with a few options.
One of them was to just buy the land for £100,000 from him, give him the cash and then sort myself out with a mortgage to finance the build, allowing me to have my own house built (something I have always wanted to do, especially where the land is, I love the area). However, my dad sees it as ‘doing’ him out of the profit he would make on the house he would build, and I would also pay £1000’s of interest to the bank with the mortgage, so I have had another idea.
If he were to ‘gift’ the land to me, I could then pay him the money for the land back over a set term, but as not to rip him off, I would take into account that the £100,000 would be worth less after years of inflation. That’s where I got £200,000 from.
My dad is 45 in a few months, and he knows he will not be able to carry on working full time forever, so I thought it may be a good idea to hold off paying the money until he wants to stop working (around 60) and then pay it for a longer term into retirement (20 years). This would also give me time to pay off the mortgage used to build the house. £85000 over 10 years would be feasible, and then just continue a similar payment to my dad until the money is paid up.

Does that sound reasonable?

jonathon_hart

Hi - sent you the spreadsheet. Unfortunately I have no idea about any legal issues potentially involved in that.

I know it is a morbid thought but what would happen if your dad (or you...) were to die in that 20 years or something happened meaning either you couldn't keep up the repayments or your dad needed the money now?

Jonathon

scottp_2

The legal issues are not really a problem as I know a few solicitors who deal with this sort of thing, so once we have an arrangement in place I can contact them and sort something out.
Onto the morbid side: If it were my dad, the land or the proceeds would go to me and my 2 brothers, so I would pay the money to my two brothers, or come to another arrangement.
If it were me then I would have a decreasing term policy for the amount outstanding so that this would be paid off should anything happen. I wouldn't have thought keeping up the repayments could pose a problem as I will have insurances etc to cover that, just the same as if I were paying a mortgage. As for my dad needing the money, then I would just take out a conventional mortgage for the money owed, secured against the house.

Hope that helps!

Thanks!

Retired_I.F.A.

£340.53 P/m Esc At 3.5% P/a Yielding 6% For 20 Years =£198978.89 =100000 Today If Inflation = 3.5% P/a

Yielding 7% The Initial Investment Needs To Be 308.72
At 8% 279.32
At 9% 252.30
At 10% 227.50

By Yield I Mean Car/apr Which Is The Same Thing. For A Deposit Saving. Or A Yield After Charges In An Investment Plan.

My Keyboard Is Playing Up Thus All Capitals When I Fix It I'll Host The Spreadsheet So You Can Play Around With It Yourself.

EDIT, THATS FUNNY I MISSED A 0 TYPING 100000 EDITED IT AND EVERYTHING WENT TO SMALL CASE :d

Retired_I.F.A.

Posted My Reply Above Without Seeing What You Are Planning.

Big Problem... What If

And There Are Hundreds Of What If Scenarios Biggest Being What If You Lose Your Ability To Earn And Pay Your Dad.


EDIT: REALLY WEIRD THIS TIME I EDITED JUST TO TYPE THIS SENTANCE AND ALL I WROTE IS SMALL CASE WITH CAPITALS ON EACH WORD. LOL HOWS THIS ALL CAPITALS SENTANCE GONNA TURN OUT WHEN I HIT RETURN

scottp_2

Retired_I.F.A. wrote: »

Posted My Reply Above Without Seeing What You Are Planning.

Big Problem... What If

And There Are Hundreds Of What If Scenarios Biggest Being What If You Lose Your Ability To Earn And Pay Your Dad.

Sounds like your computer is a bit wappy today!

I suppose there are a lot of What Ifs, but then isn't life? I just thought I would rather give my dad the extra £100,000 than the bank. Ultimately the house would have to be sold if I could not afford to pay him, just like with a mortgage.

Thanks!