Question

Kamau Makau an executive with a, valuable customer of your bank, has been promoted to head a new branch. The new branch is at a new location and he wishes to move house immediately. His present income is Kshs 3,600,000 per year. He has an outstanding mortgage of Kshs 1,350,000. He has since identified a house near his new office which is being offered at Kshs 2,700,000 and the mortgage company ha agreed to a new mortgage of Kshs 1,800,000. Completion of its purchase is three months. Contracts were exchanged after Mr. Mwai made a 10% deposit from his own resources. His present house has been on the market for a short time and no firm offers have been received. He assures you that similar houses have been sold for about the same price of Kshs 2,700,000 and he does not envisage any undue delays in the sale. Other charges applicable to the transaction are; Lawyers fee Kshs 99,000 Estate agent fee Kshs 63,000 Stamp duty is levied at 4% and the bank charges interest at 20% p.a. Mr. Mwai asks for assistance to finance the transaction

Required: i. Appraise the request (15 marks)​

Answer 1

Answer:

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