Ideas for the Mambu Banking Engine

Ability to select a longer amortisation period than the contracted loan term.

What: Functionality to select a longer amortisation period than the contracted loan term so that the PMT is determined as if the loan schedule was created for a longer period than the actual loan term. This results in the last instalment being a balloon payment, due to principal balance remaining.

Example:

£1,000,000 loan with 36 monthly instalments (3 year contracted loan term) with 240 months amortisation profile:

Calculate PMT amount with the assumption that £1,000,000 loan is given for 240 months (20 years). Then, create the loan schedule as follows:

  • First 35 months created as per the standard Mambu behaviour for the 240 months profile

  • Instalment no.36 is a balloon payment, as it includes all outstanding principal balance (+ interest due as per the standard calculation).

Why: In some countries (e.g. The UK, The Netherlands) this is a very common practice to offer loan products with longer amortisation periods than the contracted loan term. Especially for mortgages or property loan products.

Other Requirements/ Notes

  • When the functionality is enabled, show separate input fields at account creation for:

    • Loan Term

    • Amortisation Term

  • Pre-payment recalculation method: in the event of a prepayment (partial lump sum payment) being made by the borrower the methodology will be to recalculate the monthly instalments due to repay the reduced outstanding loan balance over the remaining amortisation period. Taking the above example if a prepayment was made in month 14 then monthly instalments are recalculated over the remaining 226 months amortisation period in respect of the reduced outstanding loan balance.

  • Gerard Loedolff
  • Dec 5 2019
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