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Leah's gross annual income is \$64,570. She is buying a home for \$125,340. She's making a 15% down payment and then financing the rest with a 20 year loan at 3.75% interest.

Monthly Mortgage Payment Per \$1000 Borrowed

Rate  20 year loan

3.00%    5.546

3.25%    5.672

3.50%    5.800

3.75%    5.929

4.00%    6.060

4.25%    6.192

4.50%    6.326

4.75%    6.462

5.00%    6.600

1. What is the mortgage amount she will borrow?

2. Can Leah afford this mortgage? Why or why not?

3. What will Leah's monthly mortgage payment be?

4. What will Leah's total payment for her house be?

5. What is the amount of interest Leah will pay?

May 21, 2018

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1.

\$125,340 x 15% = \$18,801 - down payment that Leah paid on the house.

\$125,340 - \$18,801 = \$106,539 - mortgage amount that Leah must borrow.

2.

That depends on many factors including Leah other living expenses, such as taxes, food, car payments, health and other insurance payments, education, entertainment....etc. Look at the criteria, in your textbook, that will determine whether Leah can afford to buy the house or not.

3.

Leah's monthly mortgage payment will be: \$106,539 / 1,000 x 5.929[from your table under 3.75%] = \$631.67.

4.

Leah total payments will be: \$631.67 x 240 months(20 years) + \$18,801(down payment) = \$170,401.80.

5.

Total amount of interest that Leah will pay = \$631.67 x 240 - \$106,539 = \$45,061.80.

May 21, 2018