You just got a substantial pay raise and decided to move the family into a bigge

Question

You just got a substantial pay raise and decided to move the family into a bigger house. Thus, you are selling your current home, liquidating your mortgage, and using the remaining equity on your home as the down payment for the new house. Your salary before taxes will now be $50,000 per year, placing you in the 20% tax bracket. How much of a monthly principal and interest payment will you qualify for under traditional mortgage lending standards?

A) $833.33

B) $1,208.33

C) $1,458.33

D) $4,166.66

E) Impossible to tell without knowing the interest rate and size of the down payment.

Explanation / Answer

According to current mortgage lending standards, the principal and interest repayments will depend not only on the current income level but also on the amount of the mortgage desired, down payment and interest rate sought for mortgage. Once these values are given one can calculate the required income level for each bracket of interest rates and taxes.

Hence the answer is Option (E)

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