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Question 1173876: 1- Aya and Harumi would like to buy a house and their dream house costs $500,000. They have $50,000 saved up for a down payment but would still need to take out a mortgage loan for the remaining $450,000 and they're not sure whether they could afford the monthly loan payments. The bank has offered them an interest rate of 4.25%, compounded monthly.
How much would they have to be able to afford to pay each month in order to pay off their mortgage in 25 years?
What is the total amount that would be paid to the lender after 25 years of payments?
2- What if Aya and Harumi could only afford a monthly payment of $2,000?
What would be the maximum mortgage amount they could afford to borrow from the bank if all the other conditions were the same?
What is the total amount that would be paid to the lender over 25 years?
Answer by Theo(13342)   (Show Source):
You can put this solution on YOUR website! an online calculator that helps you to solve this can be found at
to find the monthly payment required, provide the following inputs to this calculator.
pv = 450,000
fv = 0
np = 25 years * 12 months per year = 300
ir = 4.25% per year / 12 months per year = .354166667
payment at end
click on pmt to get:
payment at end of each time period = 2,437.82.
total amount of payments would be equal to 300 * 2,437.82 = 731,346.00.
here are the results from the calculator.
to find the maximum mortgage amount they could afford to borrow is they could only pay 2,000, provide the following inputs to this calculator.
fv = 0
np = 25 years * 12 months per year = 300
pmt = -2000
ir = 4.25% per year / 12 months per year = .354166667
payment at end
click on pv to get:
maximum mortgage amount they could afford = 369,181.93.
total payments would be equal to 300 * 2000 = 600,000.
here are the results from the calculator.
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