Kendall Is Considering the Purchase of a Home

question 39

Essay

Kendall is considering the purchase of a home. He has saved $22,000 for a down payment on a home and will finance the remainder of the purchase price with a home mortgage loan. Kendall currently rents an apartment for $1,200 per month and does not anticipate an increase in his monthly income. He wants to make sure that the monthly payment on his new home does not exceed $1,200, after-tax. Kendall has a marginal tax rate of 25 percent and an average tax rate of 22 percent. Assuming the monthly mortgage payment (before-tax) will be equal to 1 percent of the initial mortgage balance and the entire amount of each monthly payment will be deductible home mortgage interest, what is the maximum amount that Kendall can spend on a new home?

---

Definitions:

Motor Activity

Bodily movements produced by skeletal muscles that result in energy expenditure, encompassing both deliberate exercise and routine physical activities.

Cerebellum

A part of the brain located at the back of the skull, responsible for coordinating voluntary movements, balance, and posture.

Complex Coordination

The integration of different functions and activities within an organism or system to achieve a common goal efficiently.

Thirst

An essential sensation prompting the need to drink fluids, triggered by the physiological mechanisms in response to dehydration or increased salt concentration in the blood.