asked the Minister for Finance the reasons why a person who borrows £1,500 at six per cent for thirty years from the Local Loans Fund under the annuity system of repayment to build or purchase his own house has to repay a total sum of £3,252, whereas under the instalment system of repayment his total repayment for the same period and at the same rate of interest will be £2,872, £380 less than if he pays by the annuity system.
Ceisteanna—Questions. Oral Answers. - Repayment of House Purchase Loans.
10.
Loans are not issued from the Local Loans Fund to individuals for the purchase or building of their own houses except in the case of persons living in the Gaeltacht areas who may qualify for loans under the Housing (Gaeltacht) Acts. The maximum such loan is £500.
Local authorities may borrow from the Local Loans Fund for housing purposes and may repay either by instalment or by annuity.
Under the instalment system a constant proportion of the capital borrowed is repaid each year and interest is paid on the balance outstanding. Under the annuity system a constant sum which includes interest and capital repayment is paid annually during the term of the loan. The element of capital repayment in an annuity is small in the early years but increases progressively during the term. As under the instalment system a higher proportion of the debt is paid in the early years, it follows that the total amount paid by way of interest is less than that paid under the annuity system. In either case interest is paid only on the amount of the loan outstanding.