Posted by Sara on .
Johnsons accumulated a nest egg of $40,000 to use as down payment toward a new home. Present gross income has them in high tax bracket, decided to invest min $2400/month in payments (for tax break). Financial obligations cannot exceed $3000/month. If local mortgage rates were increased to 8% for 30year mortgage, how would this affect the price range of houses that the Johnsons should consider?

Math 
Reiny,
so we want the present value of 360 payments of 2400
at i = .08/12 = .006666... (I stored in calculator memory for more accuracy)
PV = 2400(1  1.006666..^360)/.006666...
= 3270840.41
So with a downpayment of 40000 and a payment of 2400 Johnson could consider a house around
367 000 dollars ..... (367080.42)
If you want to know his limit with a payment of 3000 per month, repeat the above, simply replacing the 2400 with 3000 in the calculation, then adding 40000