Question

Joanna earns a gross annual income of $68,450 and is buying a home for $134,900. She is making a 20% down payment and financing the rest with a 20-year loan at 4.25% interest.

(a) What is the mortgage amount she will borrow?
(b) Can she afford this mortgage? Justify your response.
(c) What will her monthly mortgage payment be?
(d) What will her total payment for the house be?
(e) What is the amount of interest she will pay?

Answer 1

a) $107,920

b) yes

c) $668.24

d) 187,357.75

e) $52,457.75

Explanation:

a) 20% paid, 100-20 = 80% mortgage

134900 × 80/100 = 107,920

b) 107,920 = mortgage

Mortgage including interest:

107920 × 1.0425 = $112,506.6

Income = 20 × 68450

= $1,369,000

Since her Income is greater, she can afford it.

c) 6.192 × 107920/1000

= 668.24064

d) (668.24064 × 20 × 12) + (20% of 134900)

= 187,357.7536

e) 187,357.7536 - 134900

= 52,457.7536