Donna is thinking about buying a house that costs $100,000. If she puts down $20,000 and is able to get a 5 percent mortgage, she wants an estimate of her total monthly housing expenses. As we just learned, the average annual cost for owning a house is 4.09 percent of the value of the house. If we do not include the opportunity cost of the down payment, amortization on the loan or any tax benefits from home ownership, what will be her monthly cost the first month?

Question

Lawrence Faulkner

Advanced Placement (AP)

26 June, 05:47

Donna is thinking about buying a house that costs $100,000. If she puts down $20,000 and is able to get a 5 percent mortgage, she wants an estimate of her total monthly housing expenses. As we just learned, the average annual cost for owning a house is 4.09 percent of the value of the house. If we do not include the opportunity cost of the down payment, amortization on the loan or any tax benefits from home ownership, what will be her monthly cost the first month?

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Answers (1)

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Raquel Downs · Answer 1

monthly cost = 641

Explanation:

Annual mortgage = 0.05*80000

= 4000

Monthly mortgage = 4000/12 = 333

Annual average cost of house = 0.0409*100000 = 4090

Monthly average cost of house = 4090/12 = 341

Monthly cost = 333 + 341

= 674