Anna and Doug are in the market for a new house. The maximum payment they can afford is $700 per month. Of this payment, property taxes and home owner’s insurance amount to $150 per month. If the interest rate on the mortgage is 4.5% per year, how much house can Anna and Doug afford to finance? The duration of the mortgage loan is 30 years (360 months).

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Cost of Credit

The cost of credit is an extra amount that the borrower has to pay besides the loan amount. These credit charges may vary from loan to loan. The cost of credit includes interest charges, maintenance charges, and arrangement charges. Some of the costs are mandatorily collected by the lender based on the loan amount and tenure of the loan. The cost of credit is also called finance charges of the credit.