You want to buy an apartment priced at $300,000. You have saved a deposit of $30,000. The bank has agreed to lend you the $270,000 as a fully amortising loan with a term of 25 years. The interest rate is 12% pa and is not expected to change. What will be your monthly payments? Remember that mortgage payments are paid in arrears (at the end of the month).

Question

You want to buy an apartment priced at $300,000. You have saved a deposit of $30,000. The bank has agreed to lend you the $270,000 as a fully amortising loan with a term of 25 years. The interest rate is 12% pa and is not expected to change. What will be your monthly payments? Remember that mortgage payments are paid in arrears (at the end of the month).

Answer 1

P = (Port)/(1-(1+r)^-t)

Po = $270,000

r = (12%/12)/100% = 0.01 = Monthly % rate expressed as a decimal.

t = 25yrs. * 12mo/yr. = 300 Months.

P = (270,000*0.01*300)/(1-1.01^-300) =
$853,111.56

Monthly Payments = P/t

P = (Po*r*t)/(1-(1+r)^-t)

P = (Port)/(1-(1+r)^-t)