exactly 7 years and 11 months
The Mandlake family, from Port Elizabeth, has a 20-year home loan now for
exactly 7 years and 11 months. The size of the loan was R2.65 million and
the interest rate was 10.25% p.a. compounded monthly for the past 7 years
and 8 months. Assume that they paid, every month, R500 more than the
minimum required instalment from the start.
1. What is the balance on their home loan now?
2. Determine the interest charged to date.
3. Assume that the required instalment increased precisely 3 months ago,
due to an increase in the interest rate by 100 basis points. If the Mandlake
family kept on paying the same amount as before the interest rate
change, how much more per month are they really paying compared to
the required amount?
4. Assume that the required instalment increased precisely 3 months ago,
due to an increase in the interest rate by 100 basis points. If the Mandlake
family kept on paying the same amount as before the interest rate
change, by when would they have settled their debt? Give the answer as
years and months from now.
5. Mr Mandlake died earlier today due to COVID-19 related
complications. Because Mr Mandlake had life insurance on his home
loan, the bank wrote off the debt owed by Mr Mandlake. How much
would the remainder of the Mandlake family have owed the bank if Mr
Mandlake did not have life insurance on that home loan?
6. Redo Question 5. But assume that the Mandlake family only paid the
minimum amount every month. How much would the remainder of the
Mandlake family have owed the bank if Mr Mandlake did not have life
insurance on that home loan?
7. Is it worthwhile to pay extra per month on your monthly instalment?
Explain. Why are the banks encouraging home loan owners to pay extra
per month?
