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🏠 Dream Home Escape
Unit 4 · Loan Repayments
🔑

The Mortgage Clock

Marcus and Priya need to lodge their mortgage documents by midnight or the property settlement falls through. The bank's system has locked up with six calculations stuck in the queue. Clear every one before the clock runs out.

Documents lodged
0% 0 / 6 lodged
1
Monthly interest, first month
Marcus and Priya are borrowing $20,000 at an interest rate of 12% p.a. (compounded monthly, that's 1% per month).

What is the interest charged in month 1?
Interest = opening balance × monthly rate = $20,000 × 0.01
✓ Correct, Interest = $200
2
Closing balance, end of month 1
Same loan: opening balance $20,000, interest charged $200, monthly repayment $500.

What is the closing balance at the end of month 1?
Closing = Opening + Interest − Repayment = 20,000 + 200 − 500
✓ Correct, Closing balance = $19,700
3
Total repayments, 24 months
The bank needs to verify the total amount repaid. If the monthly repayment is $500 and the loan runs for 24 months:

What are the total repayments in dollars?
Total repayments = monthly repayment × number of months
✓ Correct, Total repayments = $12,000
4
Total interest, full loan
A separate $12,000 personal loan is fully repaid with 12 monthly payments of $1,100 each.

What is the total interest paid over the life of this loan?
Total repayments = 12 × $1,100. Total interest = total repayments − original loan.
✓ Correct, Total interest = $1,200
5
Monthly interest, smaller balance
Later in the loan, the outstanding balance has reduced to $8,500. The rate is still 12% p.a. (1%/month).

What is the interest charged this month?
Interest = $8,500 × 0.01
✓ Correct, Interest = $85 (notice it's less than month 1!)
6
Extra repayment, closing balance
Opening balance: $15,000. Rate: 12% p.a. (1%/month). Minimum monthly repayment: $500. This month they pay an extra $200 on top.

What is the closing balance after this month?
Interest = 15,000 × 0.01 = $150. Total repaid = $500 + $200 = $700. Closing = 15,000 + 150 − 700.
✓ Correct, Closing balance = $14,450

🏠 SETTLEMENT APPROVED

All six documents cleared, the mortgage goes through with minutes to spare. Marcus and Priya get the keys. Their dream home is real.

Interest = balance × monthly rate
Closing = opening + interest − repayment
Total interest = repayments − loan
Extra payments save future interest
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