Tom wishes to purchase a property that has been valued at $300,000. He has $30,000 available as a deposit and will require a mortgage for the remaining amount. The bank offers him a 25-year mortgage at 2% interest. Calculate his monthly repayments. First we note that Tom requires a mortgage on $300,000−$30,000=$270,000. To calculate the monthly repayments we must apply the formula for P0 and solve for d, that is,
P0=d(1−(1+rk)−Nk(rk).
We have P0=$270,000,r=0.02,k=12,N=25, so substituting in the numbers into the formula gives
$270,000=d(1−(1+0.0212)−25⋅12)(0.02 12),
that is,
$270,000=235.9301d⟹d=$1,144.41.

1144.41