Kendall is considering the purchase of a home.He has saved $20,000 for a down payment on a home and will finance the remainder of the purchase price with a home mortgage loan.Kendall currently rents an apartment for $900 per month and does not anticipate an increase in his monthly income.He wants to make sure that the monthly payment on his new home does not exceed $900,after-tax.Kendall has a marginal tax rate of 28 percent and an average tax rate of 22 percent.Assuming the monthly mortgage payment before-tax)will be equal to 1 percent of the initial mortgage balance and the entire amount of each monthly payment will be deductible home mortgage interest,what is the maximum amount that Kendall can spend on a new home?

Question

Quizplus · Accepted Answer

The Answer of Kendall is considering the purchase of a home.He has saved $20,000 for a down payment on a home and will finance the remainder of the purchase price with a home mortgage loan.Kendall currently rents an apartment for $900 per month and does not anticipate an increase in his monthly income.He wants to make sure that the monthly payment on his new home does not exceed $900,after-tax.Kendall has a marginal tax rate of 28 percent and an average tax rate of 22 percent.Assuming the monthly mortgage payment before-tax)will be equal to 1 percent of the initial mortgage balance and the entire amount of each monthly payment will be deductible home mortgage interest,what is the maximum amount that Kendall can spend on a new home?

Kendall Is Considering the Purchase of a Home