Question
Your parents are buying a house for $187,500. They have a good credit rating, are making a 20% down payment, and expect to pay $1,575/month. The interest rate for the motrgage is 4.65%. What must their realized income be before each month and how much interest is accrued at the end of the second month?
Answers
I don't entirely understand the question. Let me do my best.
$187,500 is cost of house.
20%, or $37,500 is the down payment.
The loan amount would be $187,500 - $37,500 = $150,000.
If we assume the annual rate of the loan is 4.65%
Then the monthly rate would be 4.65%/12 = 0.3875%
If the loan is $150,000, the interest is 0.3875%
The interst for the first month is $150,000 * 0.3875% = $581.25.
You stated that their payment is $1,575.
So the amount that pays off the loan is $1,575 - $581.25 = $993.75.
At the end of the month, they owe $150,000 - $993.75 = $149,006.25
For the second month, the amount of the payment that goes towards interst is
$149,006.25 * 0.3875% = $577.40. and the amount that goes towards the loan is $997.60.
At the end of the second month they owe $148,008.65.
Regarding realized income, we recommend a monthly loan payment not to exceed 28% of the monthly income. So if a payment of $1,575 is 28% of Gross, then the math is : $1,575 = 0.28*Gross.
Gross = $5,625 monthly.
About $67,500 annually.
About $33.75 an hour.
$187,500 is cost of house.
20%, or $37,500 is the down payment.
The loan amount would be $187,500 - $37,500 = $150,000.
If we assume the annual rate of the loan is 4.65%
Then the monthly rate would be 4.65%/12 = 0.3875%
If the loan is $150,000, the interest is 0.3875%
The interst for the first month is $150,000 * 0.3875% = $581.25.
You stated that their payment is $1,575.
So the amount that pays off the loan is $1,575 - $581.25 = $993.75.
At the end of the month, they owe $150,000 - $993.75 = $149,006.25
For the second month, the amount of the payment that goes towards interst is
$149,006.25 * 0.3875% = $577.40. and the amount that goes towards the loan is $997.60.
At the end of the second month they owe $148,008.65.
Regarding realized income, we recommend a monthly loan payment not to exceed 28% of the monthly income. So if a payment of $1,575 is 28% of Gross, then the math is : $1,575 = 0.28*Gross.
Gross = $5,625 monthly.
About $67,500 annually.
About $33.75 an hour.