Jane and John have found a house, which owing to a depressed real estate market costs only $201,500. They will put $22,000 down and finance the remainder with a 30-year mortgage loan of 4.65% compounded monthly. They will also have the following expenses: property taxes of $2,100, homeowner's insurance of $1,625, and $290 mortgage insurance (in case one of them dies before the loan is repaid, a requirement from the bank). These annual amounts are paid in 12 installments and are added to the loan payment. i.) What will their full monthly cost be? ii.) If they can afford $1200 a month, can they afford the house?
Jane and John have found a house, which owing to a depressed real estate market costs only $201,500. They will put $22,000 down and finance the remainder with a 30-year mortgage loan of 4.65% compounded monthly. They will also have the following expenses: property taxes of $2,100, homeowner's insurance of $1,625, and $290 mortgage insurance (in case one of them dies before the loan is repaid, a requirement from the bank). These annual amounts are paid in 12 installments and are added to the loan payment. i.) What will their full monthly cost be? ii.) If they can afford $1200 a month, can they afford the house?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Jane and John have found a house, which owing to a depressed real estate market costs only $201,500. They will put $22,000 down and finance the remainder with a 30-year mortgage loan of 4.65% compounded monthly. They will also have the following expenses: property taxes of $2,100, homeowner's insurance of $1,625, and $290 mortgage insurance (in case one of them dies before the loan is repaid, a requirement from the bank). These annual amounts are paid in 12 installments and are added to the loan payment.
i.) What will their full monthly cost be?
ii.) If they can afford $1200 a month, can they afford the house?
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