3
QuizMultiple Choice

Mortgages

Question 3 • 26-27 Ignite Financial Literacy Personal Finance - EL3403

Shauna wants to buy a house and plans to rent the apartment located in the basement for extra income. The house has a purchase price of $195,600 and she will make a 5% down payment. Shauna has qualified for a 30 year mortgage with a fixed rate of 5.875%. Approximately how much rent should she charge for the apartment in order to cover her monthly mortgage payment if she only wants to spend $400 a month of her own money?

Answer
A
$300
B
$700
C
$1100
D
$1150

Explanation

The mortgage amount is 95% of $195,600, or $185,820. Using a 30-year loan at 5.875% annual interest, the monthly principal-and-interest payment is approximately $1,100. If Shauna contributes $400 herself, the rent needs to cover about $1,100 − $400 = $700, so the best choice is $700.

AI-written and checked against the verified answer.

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