You've recently decided to pursue your dream of owning a rental property. You've
taken out a home loan valued at R550,000 to make this happen. The loan comes with
an annual interest rate of 12% and a repayment period of 20 years. Calculate your
monthly repayment amount if the monthly repayments are due at the end of each
month

To calculate the monthly repayment amount for a loan, we can use the formula for the monthly payment on an amortizing loan. The formula is:

\[
M = \frac{P \cdot r \cdot (1 + r)^n}{(1 + r)^n - 1}
\]

Where:
- \( M \) is the monthly payment.
- \( P \) is the principal amount (the loan value), which is R550,000.
- \( r \) is the monthly interest rate (annual interest rate divided by 12).
- \( n \) is the total number of payments (loan term in years multiplied by 12).

### Given Data:
- Principal, \( P = R550,000 \)
- Annual interest rate = 12%
- Monthly interest rate, \( r = \frac{12\%}{12} = \frac{0.12}{12} = 0.01 \)
- Loan term = 20 years
- Total number of payments, \( n = 20 \times 12 = 240 \)

Now, we can plug these values into the formula.

\[
M = \frac{550,000 \times 0.01 \times (1 + 0.01)^{240}}{(1 + 0.01)^{240} - 1}
\]

Let's calculate this.The monthly repayment amount for the loan is approximately **R6,055.97**.

Would you like further details or have any questions? Here are some related questions you might find interesting:

1. How does the total interest paid over the life of the loan compare to the principal?
2. How would the monthly payment change if the interest rate were different?
3. What impact would shortening the loan term have on the monthly payment?
4. How does the amortization schedule look over the first year?
5. What would be the remaining balance after 10 years of payments?

**Tip:** When taking out a loan, it's crucial to consider not just the monthly payments but also the total interest paid over the life of the loan to fully understand the cost of borrowing.

Learn how to calculate the monthly repayment amount for a R550,000 loan with a 12% annual interest rate over 20 years. Understand the formula for amortizing loans and get a detailed step-by-step solution. Suitable for financial planning and loan analysis.

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