A prospective homeowner wants to determine how much she can borrow in the form of a fixed-rate 20-year mortgagge . Mortgages of the maturity carry a fixed interset rate of 9% . She esitmate that she can afford annual , pre-tax payments (interset plus principal ) on her mortagaes of $25,000 ( for simplicity , assume that mortgage payments are made once ayear at the end of the year )

A - How large a mortgage can she afford , assuming she makes steady payments of $25,000 per year for 20 years ? How much total interset will be paid over the 20-year life of the mortgage ? How much total interset will be paid during the first year of the mortgages ? How much pricible will be repaid in the first year ? How much of the final $25,000 payment at the end of 20 years will be interset and how much will be principal

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Originally Posted by ali513

A prospective homeowner wants to determine how much she can borrow in the form of a fixed-rate 20-year mortgagge . Mortgages of the maturity carry a fixed interset rate of 9% . She esitmate that she can afford annual , pre-tax payments (interset plus principal ) on her mortagaes of $25,000 ( for simplicity , assume that mortgage payments are made once ayear at the end of the year )

A - How large a mortgage can she afford , assuming she makes steady payments of $25,000 per year for 20 years ? how much total interset will be paid over the 20-year life of the mortgage ? How much total interset will be paid during the first year of the mortgages ? how much pricible will be repaid in the first year ? how much of the final $25,000 payment at the end of 20 years will be interset and how much will be principal

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What's up ali? Okay... I assume you have a financial calculator, yeah? Why don't you try to come up with an answer on your own and let me know what you got... I'll let you know if you were right or wrong if you tell me the steps you took to get your answer. You have to do some of the work or you'll never understand how to solve this type of problem, cool?

Hi Jake,

My calculations are showing that a mortgage of 228613.64 can be afforded, interest payment would be 271786.36 and interest in year 1 would be 20539.23. The principal payment in the first year would be 4460.77 and in the final year
2064.22 would be the interest and 22935.78 would be for the principal. Can you let me know if the calculations are correct.

The mortgage afforded would be the pv of 25000 payments discounted at 9% right?

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Originally Posted by Greenhorn123

Hi Jake,

My calculations are showing that a mortgage of 228613.64 can be afforded, interest payment would be 271786.36 and interest in year 1 would be 20539.23. The principal payment in the first year would be 4460.77 and in the final year
2064.22 would be the interest and 22935.78 would be for the principal. Can you let me know if the calculations are correct.

The mortgage afforded would be the pv of 25000 payments discounted at 9% right?

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Greenhorn - all of your calculations match mine so we're squared up. Minor quibble but it may be a typo... I got a mortgage of $228,213.64. Everything else is the same as yours.