You are ready to buy a house. Total price is $160,105. For the remaining part, you plan to borrow the loan from the bank. The interest rate on the loan is 6% per year with monthly compounding (.5% per month) for a 30-year fixed rate loan. You are also required to pay $20000 initially for down payment. If you have an annual salary of $36,000, and you expect to use 30% of your monthly income to cover the house loan. Should you buy this house?

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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.