You can afford monthly payments of $1,900

Finance Aug 11, 2020

You can afford monthly payments of $1,900. Current mortgage rates are 3.09% for a 30-year fixed rate loan. You are required to make a 20% down payment and have the cash to do it. What price home can you afford?

Expert Solution

We can calculate the price of the home by using the following formula in excel:-

=-pv(rate,nper,pmt,fv)

Here,

PV = Price of the home

Rate =3.09%/12 = 0.2575% (monthly)

Nper = 30*12 = 360 periods (monthly)

Pmt = $1,900

FV = 0

Substituting the values in formula:

= -pv(0.2575%,360,1900,0)

= $445,514.26

Price of the home = $445,514.26 / (1 - 20%)

= $556,892.82

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