Question

A couple can afford to make a monthly mortgage payment of $ 650. If the mortgage rate is 9 % and the couple intends to secure a 30 -year mortgage, how much can they borrow?

Answer 1

The couple can borrow a maximum of $63,462 for their mortgage.

Step-by-step explanation:

To calculate the maximum loan they can afford, we need to use the present value formula. The formula is PV = R(1 - (1 + i)^(-n)) / i, where PV is the loan amount, R is the monthly payment, i is the monthly interest rate, and n is the number of payments.

In this case, the monthly payment is $650, the interest rate is 9% (0.09 as a decimal), and they intend to secure a 30-year mortgage (360 payments).

Plugging these values into the formula, we have: PV = 650(1 - (1 + 0.09)^(-360)) / 0.09.

Calculating this, the maximum loan they can afford is approximately $63,462.