What is the largest purchase price you could pay if you can afford a mortgage payment of $1,300 per month for 30 years and the interest rate is 5.9 percent?

Question

Quizplus · Accepted Answer

The formula to calculate the maximum mortgage amount is:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where,
M = maximum mortgage amount
P = monthly payment
i = monthly interest rate (5.9% / 12 = 0.00492)
n = number of months (30 years x 12 months/year = 360 months)

Plugging in the values:
M = 1300 [ 0.00492(1 + 0.00492)^360 ] / [ (1 + 0.00492)^360 – 1]
M = $219,025 (rounded to the nearest dollar)

Therefore, the largest purchase price you could pay is $219,025.

What Is the Largest Purchase Price You Could Pay If