Question

  Dorothy and Matt are ready to purchase their first home. Their current monthly cash inflows are $ 4000​, and their current monthly cash outflows are ​$3,147. Their rent makes up ​$520 of their cash outflows. They would like to put 10​% of their cash inflows in savings and put another ​$160 per month in their checking account for emergencies. How much of a mortgage payment can they manage under these​ conditions?

Answer 1

Amount available for monthly mortgage payment:

= (Cash inflow - Cash outflow) + Saving in rent expense - Monthly saving - transfer to checking account

= (4,000 -3.147) + 520 -0.1*4.000 - 160

= $813

Please note: It is assumed that they can save monthly rent expenditure once they bought home by paying mortgage payment.

Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.