Question

You can afford monthly payments of S 00 i current mortgage rates are 2 52% for a 15-year fixed rate loan. how much can you a ord to borrow, if you are re used to make a 20% down payment and you have the cash on hand to do it, how expensive a home can you a ord? Hnt: You will need to solve the loan payment formula for P) How much can you afford to borrow? Round to the nearest olar as needed ) How expensive a home can you afford? (Round to the nearest dollar as needed )

Answer 1

For Mortgage,

Monthly Payment = 4600

Mortgage Rate = 2.52%

Time Period = 15 years

In mortgage loan,

Period is monthly and payment is done monthly, and future value = 0,

a.

Present Value = Loan Amount that can be afforded on given monthly payment,

Calculating Present Value,

Using TVM Calculation,

PV = [FV = 0, PMT = 600, T = 180, I = 0.0252/12]

PV = $89,856.53

So,

Mortgage Amount that can be afforded today = $89,857

b.

If Down payment = 20%(cash paid on initiation of mortgage)

80% of the loan is the present value of mortgage calculated in Part(a)

Total Loan Amount = 89,856.53/(0.80)

Loan Amount = $112,321

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