There is a general rule that you should spend no more than 25% of your monthly income on your rent or mortgages. Additionally, there is a general rule that says your monthly mortgages payment on a house is approximate 1% of the original mortgage amount. What is the largest mortgage the Salinas family can afford for their home if their family's income is $3000 a month?
What is the interest on a loan of $20,000 made of 6% per year simple interest for a time period of one month?
To find out the largest mortgage the Salinas family can afford, we need to apply the general rule that suggests spending no more than 25% of their monthly income on their mortgage payment.
Step 1: Calculate the maximum monthly mortgage payment:
Monthly income = $3000
Maximum mortgage payment = 25% of monthly income
Maximum mortgage payment = 0.25 * $3000
Maximum mortgage payment = $750
According to the second general rule, the monthly mortgage payment on a house is approximately 1% of the original mortgage amount. Therefore, the maximum mortgage the Salinas family can afford would be four times the maximum monthly mortgage payment.
Step 2: Calculate the largest mortgage:
Maximum monthly mortgage payment = $750
Largest mortgage = 4 * maximum monthly mortgage payment
Largest mortgage = 4 * $750
Largest mortgage = $3000
The Salinas family can afford a maximum mortgage of $3000 for their home.