Over the past 30 years, interest rates have varied widely. The rate for a 30-year mortgage reached a high of 14.75% in July 1984, and it reached a low of 4.64% in October 2010.
A significant impact of lower interest rates on society is that they enable more people to afford the purchase of a home.
We consider the purchase of a home that sells for $125,000.
Assume that we can make a down payment of $25,000, so we need to borrow $100,000.
We can afford to pay a monthly amount of $683.33.
If the term is 30 years and the interest rate is the historic high of 14.75%, how much can we borrow?
Can we afford the home?
1 answer