Question

You can afford $1,000 per month as a house payment. If you can get a home loan at 5.3% interest for 15 years (paid monthly), how expensive of a home can you afford? In other words, what amount loan can you pay off with $1,000 per month for 15 years?

Answer 1

You can afford $1,000 per month as a house payment.

You can get a home loan at 5.3% interest for 15 years (paid monthly).

Then, after 15 years, the price of house that you can afford would be:

A x (1 + (5.3/100)/12)^(12 x 15) = 2.2 x A

With payment of 1000$ per month in 15 years, then we have

2.2 x A = 1000 x 12 x 15 = 180000

=> The price of house that you can afford now, would be:

A = 180000/2.2 = 81818.2$

Hope this helps!

:)