If you are in the market for a bond in order to finance a new home or for the purpose of getting additional financing for your additional home then you are probably wondering how the repayment is calculated. For some the concept can seem rather complex. In reality the process for how are bond repayment calculated is not as difficult as it may seem at first.

The first and most important factor which is used in determining the repayment amount is the actual amount of the bond. Obviously the higher the bond amount the greater the monthly payments are going to be. The next major factor which has a huge impact on the monthly expenses is the number of years the bond will be held for. Typically bonds are available for 10, 15 and 20 years. In some cases bond’s can also be found for as many as 30 years. The longer the term is on the bond the lower the monthly payments will be. It is important to note however, that the longer the term is the more money you will pay out in interest over the term of the bond.

Another major factor in how are bond repayment calculated is the interest rate itself. Interest rates are generally calculated based on a person’s existing credit history. The better your credit history is the better your interest rate will be. The lower the interest rate the lower your monthly payments will be on the bond.

Once these figures have been calculated the next step is to take it all into account. The interest rates on bonds is always set as an APR or annual percentage rate. Since you are paying a monthly fee instead of a yearly fee the interest rate is broken down into a one month interest rate. To calculate the monthly interest rate you simply take the interest rate which is determined and divide it by 12. If the interest rate is 10% then you do .10 / 12 which will yield .0083. This means you are paying an interest rate of .83% each month. The next factor to consider is how many years you will be paying on the bond. If you figure on 15 years then you multiply 15 x 12 which gives you the number of months you will be paying on the loan.

Now that you know how many months you will be paying and what interest rate you will be paying per month you are ready to calculate the actual monthly payment. First you all 1 to the interest rate which was figured earlier. Figuring an interest rate of .0083 per month you end up with 1.0083. This will then be multiplied to the power of the number of months you are taking the loan for. This means you essentially multiply 1.0083 by itself 180 times. This yields a number of 4.427495. You then subtract one from this number. This gives you 3.427495. You then take 1.0083 and multiply it by your actual interest rate and then multiply that number by the loan amount. You then divide it by the number you got by subtracting 1. The formula in this case would look like (100,000 (.0083 x 3.427495)) / 3.427495). By calculating this formula you get the monthly payments including the interest. This ends with a figure of R1072 per month.