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

To calculate the monthly repayment amount for your home loan, we can use the formula for the monthly payment of a fixed-rate mortgage:

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

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

Given:
- \( P = \text{R550,000} \)
- Annual interest rate = 12%, so the monthly interest rate \( r \) is \( \frac{12\%}{12} = 1\% = 0.01 \)
- Loan term = 20 years, so the number of monthly payments \( n \) is \( 20 \times 12 = 240 \)

Now, substitute these values into the formula:

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

First, calculate \( (1 + 0.01)^{240} \):

\[
(1 + 0.01)^{240} = 1.01^{240} \approx 9.646
\]

Next, calculate the numerator:

\[
0.01 \times 9.646 \approx 0.09646
\]

Now, calculate the denominator:

\[
9.646 - 1 = 8.646
\]

Now, compute the fraction:

\[
\frac{0.09646}{8.646} \approx 0.01116
\]

Finally, multiply by the principal:

\[
M = 550,000 \times 0.01116 \approx 6138
\]

So, the monthly repayment amount is approximately R6138.

Would you like more details or have any questions?

Here are some related questions for further exploration:

1. How does changing the interest rate affect the monthly repayment amount?
2. What would be the monthly repayment amount if the loan term was 15 years instead of 20 years?
3. How much total interest will be paid over the life of the loan?
4. What is the effect of making an extra payment every year on the total interest paid?
5. How would the monthly repayment change if the loan amount was R650,000 instead of R550,000?

**Tip:** When considering a home loan, it's crucial to also account for additional costs such as property taxes, insurance, and maintenance.

Learn how to calculate the monthly repayment for a R550,000 home loan with an annual interest rate of 12% over 20 years. This step-by-step guide uses the fixed-rate mortgage formula to determine the monthly payment, which is approximately R6138. Suitable for students in Grades 10-12 and individuals interested in personal finance.

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