APPRAISAL FOR MR OTABIL.

INTRODUCTION
1. Mr. Christopher Otabil is a customer of the bank, though the case study is silent on
the relationship
2. He has approached us with an open bridge finance request.
3. This appears to be a risky proposition since he is nearing retirement.
4. The bank will be willing the assist Mr. Otabil once the appraisal goes in their
favor.

CHARACTER
1. Mr. Otabil is married with children; we can hence assume that there is domestic
stability.
2. Mr. Otabil is a legal practitioner. This is an indication of a high social status.
3. Mr. Otabil has an existing house. This gives an indication of a savings culture

ABILITY
1. Mr. Otabil has a stable employment with a monthly income of GHS6, 500.00 with
added allowances
2. Mr. Otabil’s wife is also gainfully employed and can assist with the household
expenses.
3. The couple has 3 children of school going age. We expect the fee payment to be a
drain on finances.
4. Mr. Otabil is 59, which is 1 year away from the average retirement age of 60. The
bank will want to make a short term commitment.

MARGIN
1. An interest rate of 30% will be advised. With a base rate of 27% and a risk margin
of 3%, the interest rate will be (27+3 = 30%).
2. Processing fee of 1%
3. Valuation fee of GHS 3,000.00
4. Facility fee of 0.5%

PURPOSE
The purpose of the facility is to pay off outstanding mortgage on existing house and to
purchase the new house.
AMOUNT
Cost of New House = GHS 150,000.00
Less New Mortgage on the New House = GHS (40,000.00)
= GHS 110,000.00
Add Outstanding Mortgage on Old House= GHS 25,000.00
= GHS 135,000.00

REPAYMENT
Duration = 1 year
Principal = GHS 135,000.00
Rate = 30%
( principal∗rate∗time)
Simple Interest =( )∗0.5
100
= (135,000 * 0.30 *1) * 0.5
= GHS 20,250.00
But GHS 20,250.00 is interest for entire 1 year duration.
Therefore monthly interest payable will be = 20,250 / 12
=GHS 1,687.50

Profit or Loss after Transaction

Sale Of Old House 120,000.00

Less : Old Mortgage (25,000.00)
Equity 95,000.00

Add: New Mortgage 40,000.00

135,000.00
Buy New House (150,000.00)

Loss - 15,000.00

Alternatively
Amount Advanced to Mr. Otabil = GHS 135,000.00
Total inflow from Sale of Old House = GHS 120,000.00
Loss = GHS 15,000.00
 Monthly Income & Expenditure Account for Mr. Otabil

GHS GHS
Income
Salary 6,500.00
Allowance 458.33

Less : Expenses
Fees : Ekow ( 150.00)
Jacob ( 125.00)
Mary ( 162.50)
Monthly Household (10,000.00)
Loan Repayment ( 1,687.50) (10,437.50)

Deficit -3,479.17

Comment
1. Mr. Otabil doesn’t have enough to pay his monthly loan repayment amount. His
expenses per month far exceed his monthly income.

2. However if you consider his remuneration with that of wife together, his situation
is made better off.

Household salary and allowances put together ;

New Income =GHS(5,500.00+6,500.00+416.67+458.33)= GHS 12,875.00
Less Expenses = GHS 10,437.50
= GHS 2,437.50

3. The entire transaction puts him in a loss position of GHS 15,000.00 hence the
bank will require that he brings an additional equity of an amount above GHS
20,000.00.

Insurance / Security
1. Legal mortgage over the old house.
2. Keyman insurance
3. A Charge over the new house.
4. The security is adequate.
Monitoring / Other Conditions
1. Regular checking of account statistics.
2. Undertaking to route the sales proceeds through our bank
3. Title to the land of the new house
4. Permit of the new house building
5. Monitoring of housing prices.

Summary / Decision

**summarize the case study **

1. From the appraisal, it is obvious that Mr. Otabil will not be able to meet his
monthly loan repayment request.
2. He can however have an agreement with his wife to put their household earnings
together which will put him in a much better position.
3. Also the entire transaction puts him in a loss position of GHS 15,000.00 hence the
bank will require that he brings an additional equity of an amount above GHS
20,000.00.
4. Therefore the loan request will be deferred until Mr. Otabil is able to meet these
two conditions.