Let's say I take out a loan of £100,000, and I have to pay it off in exactly 30 years. If the interest rate on the loan is 5 % for the first 5 years, then 6 % for the remaining years, how can I calculate what the regular annual repayments are?
I have found formulae at http://www.financeformulas.net/Loan_Payment_Formula.html and http://www.financeformulas.net/Remaining_Balance_Formula.html
but when I use them in combination I am left with three unknowns and two equations.
Treat the entire 30-year loan as having an interest rate of 5 % to get the regular repayment amount for the first 5 years. Calculate the Future Value of the loan after these 5 years and use this figure in calculating the repayment amounts for the remaining 25 years at a rate of 6 %.