Question

Based on my income right out of school I estimate I can afford about $2,000/month to spend on housing. How much mortgage will this get me if I want to buy? How much rent would I have paid over 5 years if rent rises 5% per year? Assume I can get a 30 year fixed-rate mortgage at 5%.

Answer 1

Joanna can afford a maximum mortgage of approximately $234,075. She will end up paying around $360,000 after 30 years.

Step-by-step explanation:

To calculate the mortgage amount affordable with a $2,000 monthly payment, one could use financial formulas or calculators that consider interest rates and loan periods. Over 5 years, rent starting at $2,000 a month and increasing annually by 5% can be summed up to find the total amount paid. Comparing homeownership and renting involves evaluating long-term costs, flexibility, and potential for equity.

To determine the maximum mortgage Joanna can afford, we need to calculate her monthly mortgage payment. She can afford to pay $12,000 a year for a house loan, which is equivalent to $1,000 per month. Considering a 30-year mortgage at an interest rate of 4.2%, we can use the formula for the monthly loan payment for a mortgage. Using this formula, we can find that Joanna can afford a maximum mortgage of approximately $234,075.

To calculate how much Joanna will end up paying after 30 years, we can multiply her monthly mortgage payment by the number of months in 30 years (360 months). The total amount she will pay over the course of 30 years is around $360,000.

1. The maximum mortgage Joanna can afford is approximately $234,075.
2. Joanna will end up paying around $360,000 after 30 years.