On 21/2/21 5:46 am, Jeff Zeitlin wrote:
> On Sat, 20 Feb 2021 17:20:33 -0000, <xxxxxx@quibell.org.uk> wrote to
> Freelance Traveller:
>
> <snip>
> I couldn't find the actual text of the financing rules in GT; I'll take
> Alex's reading as valid. However, down payment vs no down payment and 1/240
> of purchase price vs 1/240 of balance really only changes the rate and the
> final payout.

Thanks for pointing out I'd left this ambiguous.

GT:FT p98, "Bank Financing" - not only do prospective mortgagees require
the boodle (20% down, then 1/240th of purchase price per month for 40
years), they require the Ship Owner advantage and a very good reaction
roll from the loan officer.

From experience, this alone can be worth a session or two of golden
roleplaying, traipsing around trying to secure such a mortgage. 
Especially in the shadow of a giant project tapping out most debt
markets in the sector.

>
> I used
> https://fidelitybank.com/resources/knowledge-center/calculator-what-is-my-loan-rate/
> for the following calculations; this computes a rate based on the purchase
> price, down payment (what you've been calling 'deposit'), payment amount,
> and term of the loan. For the below, I picked numbers which would be easy
> to BotE for the numerical relationships, not because the dollar amounts
> were reasonable for starships. I didn't tick the box for the payment
> schedule, but if I had, it would have included a table showing how much of
> each monthly payment was paying off the accrued interest and how much was
> paying down the principal.
>
> For CT/MT, which states 20% down and 1/240 of purchase price for 480
> months, I used
>
> PURCHASE PRICE:      $240,000
> DOWN PAYMENT AMOUNT: $ 48,000
> PAYMENT AMOUNT:      $  1,000 (this is 1/240 of the purchase price)
> LOAN TERM:                480 months
>
As I mentioned above, this is also the (default) GT case, implying a
5.57% pa interest rate.
>
> It's not discussed in any version of Traveller, but in the real world - at
> least in parts of the United States - if your down payment is less than
> 20%, you will incur an extra expense for 'Private Mortgage Insurance'. This
> supposedly offers the bank some extra protection against default, and what
> I could find on it basically says that the extra payment is applied against
> equity until you reach the 20% threshhold - essentially, it folds the
> difference between your actual down payment and a 20% down payment into
> your monthly payments for part of the loan period, based on the PMI rate,
> which nominally ranges from 0.5% to 2.25% of the purchase price per annum.
> This is not compounded; it is a flat addition to your payment until you
> reach the 20%-of-purchase-price threshhold. The above calculations do NOT
> account for PMI in the Mongoose calculation, and for the CT/MT and GT
> calculations, PMI would not be required due to the 20% down payment.

Here in STRAYA, it's called "Lender's Mortgage Insurance", and is
straight up a single insurance premium paid by the borrower to the
lender for them to buy an insurance policy against the risk of the
borrower's defaulting.

Although there isn't an explicit "pay X% pa extra until we're happy"
amount, loan-to-value ratios beyond 80% tend to be punished with higher
interest rates and less flexible loan terms, ceteris fnordibus.

This doesn't even get _near_ commercial and/or industrial property
lending - whole different kettles of fish.

>
> In the US, mortgage rates are keyed to the "Prime Rate" set by the Federal
> Reserve Banking System Board of Governors, which is the rate that the
> member banks loan to other banks at. Mortgage rates are set at "prime plus
> x%" for variable-rate mortgages, and fixed-rate mortgages are set at some
> amount above prime at contract time but not varying over the life of the
> loan. I don't know how they're set in other countries, but I imagine it's
> similar, with countries using Currency Boards instead of a Reserve Bank
> probably setting rates based on either the prime-rate-equivalent of the
> benchmark currency, or on LIBOR or SOFR.

The Bank Bill Swap Rate (1 basis point as at 08/02) is the domestic AUD
equivalent of LIBOR, but without the direct link to mortgage rates.  I
think the Reserve Bank of Australia's cash rate target is a bigger driver.

Incidentally, LIBOR-as-we-know-it is on the way out - with publication
intended to cease as at the end of this year, due to (I think)
structural changes in how large banks raise their funding (mainly
outside the direct interbank market, now).

>
> (Traveller starship mortgages are treated as fixed-rate mortgages.)
>
I think this is the only practically-gameable abstraction. 
Variable-rate ship mortgages, although more closely reflecting
terrestrial commercial reality, require some mechanism to generate the
rate changes and are more GM bookkeeping.  Even I'm not willing to go
that far.
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