In: Finance
You currently pay $950 per month in rent and would not be comfortable paying more than this for housing. How much money could you borrow to buy a house, assuming a 30-year loan term and a prevailing annual interest rate of 4.65%?
Loan Amount = Present value of monthly payment discounted at a monthly rate.
Monthly Amount = 950
Monthly Rate = 4.65/12% = 0.3875%
Number of payments = 12*30 = 360
Loan Amount = 950/(1+0.003875)^1 + 950/(1+0.003875)^2 +950/(1+0.003875)^3 +950/(1+0.003875)^4 +950/(1+0.003875)^5 +950/(1+0.003875)^6 +950/(1+0.003875)^7 +950/(1+0.003875)^8 +............+ 950/(1+0.003875)^360
Loan Amount = 184238.20 Answer