Consider a 15 year mortgage with a 3% APR interest rate and a 20% down payment...

Consider a 15 year mortgage with a 3% APR interest rate and a 20% down payment if you can afford a $1500 monthly payment, how expensive a house can you buy?

a. $254,250

b. $217,208

c. $271,510

d. $298,402

Expert Solution

Ans c. $271,510

P =	Regular Payments
PV =	Loan Amount
r =	rate of interest
n =	no of periods

P =	r (PV)
	1 - (1 + r )^-n

1500 =	(3%/12)*PV
	1 - (1 / (1 + 3%/12)^180))

1500 =	0.0025 * PV
	0.362013678642485

PV =	1500 / 0.0025 * 0.362013678642485

PV =	217208.21

Total Cost =	Loan / (1 - Downpayment)
	217208.21/ (1 - 20%)
	271510

jeff jeffy answered 2 years ago

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