Question

Maria wants to build her house at the village before she retires. She can afford payments of N$3500 per month

and can borrow at 0.55% per month over 15 years. How much can she afford to borrow on a fully redeemable

Answer 1

The first step is to calculate the monthly interest rate: 0.55% = 0.0055

Then, we can use the mortgage formula to calculate the amount Maria can borrow:

M = P [ i(1 + i)^n ] / [ (1 + i)^n - 1]

Where:

M = Monthly payment (N$3500)

P = Principal (unknown)

i = Monthly interest rate (0.0055)

n = Total number of payments (15 years x 12 months/year = 180)

Substituting the values, we get:

N$3500 = P [ 0.0055(1 + 0.0055)^180 ] / [ (1 + 0.0055)^180 - 1]

Simplifying the equation, we get:

N$3500 [ (1 + 0.0055)^180 - 1 ] = P [ 0.0055(1 + 0.0055)^180 ]

N$3500 [ (1.0055)^180 - 1 ] = P [ 0.0055(1.0055)^180 ]

N$3500 = P [ 0.0055(1.0055)^180 ] / [ (1.0055)^180 - 1 ]

Solving for P, we get:

P = N$3500 / [ (0.0055(1.0055)^180) / [(1.0055)^180 - 1 ] ]

P ≈ N$434,141.76

Therefore, Maria can afford to borrow up to N$434,141.76 on a fully redeemable mortgage with monthly payments of N$3500 over 15 years at 0.55% per month.