Peter wants to buy a duplex with a purchase price of $226,950. Peter can afford a 10% down payment. Peter earns $2,985 a month and wants to spend no more than 10% of his income on his mortgage payment. Peter is going to rent out the other half of the duplex. He thinks that if he charges $900 a month in rent this will cover the remainder of his mortgage payment. Given that Peter has a 30 year mortgage with a fixed rate of 6.25%, how should Peter adjust how much he charges for rent of the other half of the duplex?

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anthougo anthougo · Answer 1 · 2021-12-25T12:32:15+01:00

Peter needs to adjust the amount he charges for rent for the other half of the duplex by increasing it to $960.

Data and Calculations:

Down Payment = 10 %

Loan Term = 30 years

Interest Rate = 6.25%

House Price = $226,950.00

Loan Amount = $204,255.00 ($226,950 x (1 - 10%)

Down Payment = $22,695.00 ($226,950 x 10%)

Total of 360 Mortgage Payments = $452,747.94 ($1,257.63 x 360)

Total Interest = $248,492.94

Results:

Monthly Pay: $1,257.63

Peter's monthly earnings = $2,985

10% of monthly earnings = $298.50

Monthly rent income expected = $900

The Total Earnings (10% of monthly earnings Plus Monthly Rent) per month = $1,198.50 ($298.50 + $900)

The shortfall in monthly earnings versus monthly mortgage payment = $59.13 ($1,198.50 - $1,257.63).

Thus, Peter needs to adjust the amount that he charges for rent, increasing it by $59.13 to $959.13, or $960 approximately.

Learn more on the computation of monthly mortgage payment here: https://brainly.com/question/22846480