Question

Sam is looking to buy his first flat, and has R15 000 in cash savings which he will use as a deposit. He has viewed a flat which is on the market for R250 000, and he would like to work out how much the monthly repayments would be. He will be taking out a 30 year mortgage with monthly repayments. The annual interest rate is 11%.

Answer 1

Principal mortgage amount (P) : 250,000 - 15,000 = 235,000

Annual interest rate (i) = 11%

Loan term = 30 years

Number of monthly payments (n) = $30 \times 12= 360$

Monthly mortgage payment (M) = $\frac{P [ i (1 + i) ^n]}{[(1+i) ^n -1]}$

i= $\frac{11}{12}$ = 0.9167

M= $235000[ 0.9167( 1+ 0.9167)^{360}]/ [(1+0.9167)^{360} -1]$

M= 2,237.96

Therefore monthly repayments = R2,237.96