The Johnsons have accumulated a nest egg of $50,000 that they intend to use as a
ID: 2646845 • Letter: T
Question
The Johnsons have accumulated a nest egg of $50,000 that they intend to use as a down payment toward the purchase of a new house. Because their present gross income has placed them in a relatively high tax bracket, they have decided to invest a minimum of $2200/month in monthly payments (to take advantage of the tax deduction) toward the purchase of their house. However, because of other financial obligations, their monthly payments should not exceed $2800. If local mortgage rates are 2.5%/year compounded monthly for a conventional 30-year mortgage, what is the price range of houses that they should consider? (Round your answers to the nearest cent.)
least expensive $ most expensive $Explanation / Answer
Least expensive would be the house that cost $607,000, which includes down payment of 50,000 and loan of 557,000 at 2.5% per year for 30 years: Please see the table below: The monthly payment is $ 2200
The most expensive house that they can buy is for $ 759,000 which includes down payment of $ 50,000 and loan of 709,000 for 30 years at 2.5% rate of interest, This results in monthly EMi of 2801.41, Please refer to the teable below:
Year Month Beginning Balance Payment Principal Interest Cumulative Principal Cumulative Interest Ending Balance 2014 Jan 557,000.00 2,200.82 1,040.40 1,160.42 1,040.40 1,160.42 555,959.60 Feb 555,959.60 2,200.82 1,042.57 1,158.25 2,082.97 2,318.67 554,917.03 Mar 554,917.03 2,200.82 1,044.74 1,156.08 3,127.71 3,474.75 553,872.29 Apr 553,872.29 2,200.82 1,046.92 1,153.90 4,174.63 4,628.65 552,825.37 May 552,825.37 2,200.82 1,049.10 1,151.72 5,223.73 5,780.37 551,776.27 Jun 551,776.27 2,200.82 1,051.29 1,149.53 6,275.02 6,929.90 550,724.98 Jul 550,724.98 2,200.82 1,053.48 1,147.34 7,328.50 8,077.24 549,671.50 Aug 549,671.50 2,200.82 1,055.67 1,145.15 8,384.17 9,222.39 548,615.83 Sep 548,615.83 2,200.82 1,057.87 1,142.95 9,442.04 10,365.34 547,557.96 Oct 547,557.96 2,200.82 1,060.07 1,140.75 10,502.11 11,506.09 546,497.89 Nov 546,497.89 2,200.82 1,062.28 1,138.54 11,564.39 12,644.63 545,435.61 Dec 545,435.61 2,200.82 1,064.50 1,136.32 12,628.89 13,780.95 544,371.11 Yearly Schedule of Balances and Payments Year Beginning Balance Payment Principal Interest Cumulative Principal Cumulative Interest Ending Balance 2015 544,371.11 26,409.84 12,949.17 13,460.67 25,578.06 27,241.62 531,421.94 2016 531,421.94 26,409.84 13,275.72 13,134.12 38,853.78 40,375.74 518,146.22 2017 518,146.22 26,409.84 13,611.45 12,798.39 52,465.23 53,174.13 504,534.77 2018 504,534.77 26,409.84 13,955.66 12,454.18 66,420.89 65,628.31 490,579.11 2019 490,579.11 26,409.84 14,308.58 12,101.26 80,729.46 77,729.58 476,270.54 2020 476,270.54 26,409.84 14,670.42 11,739.42 95,399.88 89,469.00 461,600.12 2021 461,600.12 26,409.84 15,041.41 11,368.43 110,441.29 100,837.43 446,558.71 2022 446,558.71 26,409.84 15,421.78 10,988.06 125,863.07 111,825.49 431,136.93 2023 431,136.93 26,409.84 15,811.78 10,598.06 141,674.85 122,423.55 415,325.15 2024 415,325.15 26,409.84 16,211.63 10,198.21 157,886.48 132,621.76 399,113.52 2025 399,113.52 26,409.84 16,621.60 9,788.24 174,508.08 142,410.00 382,491.92 2026 382,491.92 26,409.84 17,041.93 9,367.91 191,550.01 151,777.91 365,449.99 2027 365,449.99 26,409.84 17,472.90 8,936.94 209,022.91 160,714.85 347,977.09 2028 347,977.09 26,409.84 17,914.76 8,495.08 226,937.67 169,209.93 330,062.33 2029 330,062.33 26,409.84 18,367.80 8,042.04 245,305.47 177,251.97 311,694.53 2030 311,694.53 26,409.84 18,832.29 7,577.55 264,137.76 184,829.52 292,862.24 2031 292,862.24 26,409.84 19,308.53 7,101.31 283,446.29 191,930.83 273,553.71 2032 273,553.71 26,409.84 19,796.81 6,613.03 303,243.10 198,543.86 253,756.90 2033 253,756.90 26,409.84 20,297.44 6,112.40 323,540.54 204,656.26 233,459.46 2034 $233,459.46 $26,409.84 $20,810.73 $5,599.11 $344,351.28 $210,255.36 $212,648.72 2035 $212,648.72 $26,409.84 $21,337.01 $5,072.83 $365,688.28 $215,328.20 $191,311.72 2036 $191,311.72 $26,409.84 $21,876.59 $4,533.25 $387,564.87 $219,861.45 $169,435.13 2037 $169,435.13 $26,409.84 $22,429.81 $3,980.03 $409,994.68 $223,841.48 $147,005.32 2038 $147,005.32 $26,409.84 $22,997.03 $3,412.81 $432,991.71 $227,254.29 $124,008.29 2039 $124,008.29 $26,409.84 $23,578.59 $2,831.25 $456,570.29 $230,085.55 $100,429.71 2040 $100,429.71 $26,409.84 $24,174.85 $2,234.99 $480,745.15 $232,320.53 $76,254.85 2041 $76,254.85 $26,409.84 $24,786.20 $1,623.64 $505,531.34 $233,944.18 $51,468.66 2042 $51,468.66 $26,409.84 $25,413.00 $996.84 $530,944.34 $234,941.02 $26,055.66 2043 $26,055.66 $26,409.84 $26,055.66 $354.18 $557,000.00 $235,295.20 $0.00Related Questions
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