Jenny's Future Home
By: Tommy Hernandez
Scenario
Jenny's Student Loan
Jenny has accumulated a student loan of $20,000 at a 6.8% interest rate and has 10 years to pay it off. In order to calculate what she must pay monthly, a present value equation must be used. Once everything is plugged in (i.e. her student loan, interest rate, and number of years), you are able to see that her monthly payments comes out to be $230.16.
Monthly Earnings and Monthly Expenses
Yearly Income: $30,000
Monthly Income: $2,500
Expenses
Student Loan: $230.16
Food: $600
Clothes: $60
Gas: $80
Utilities: $355
Entertainment: $150
Phone: $60
Transportation: $50
Car: $400
Total Net Income
(Monthly Income-Monthly Expenses)= $514.84
Jenny's First Home
The real issue however, if how much does Jenny have to spend on a house? In order to find this out, we must again use the present value equation. By using the amount of money Jenny has left over per month, we can find the maximum priced house that Jenny can afford. In this case for a 30 year fixed loan, Jenny can afford to pay $126,933.68
Finding the Perfect Home
10967 Westgate Rd, Overland Park, KS 66210
Early Payment
With this new information, Jenny decided to also see how much money this could potentially save her. In order to do this, Jenny multiplied the monthly payment by the number of months it would take her to pay it off.
Original First Payment: 360*454.27=$163,537.20
New Payment: 293.11*522.41= $153,123.60
Money Saved: $163,537.20-$153,123.60= $10413.60
Amortization Chart
Sources
Bankrate:
Welcome to Bankrate. (n.d.). Retrieved March 22, 2015, from http://www.bankrate.com/Zillow:
Single Family Homes For Sale - 2 Homes | Zillow. (n.d.). Retrieved March 22, 2015, from http://www.zillow.com/homes/for_sale/Overland-Park-KS/fsba,fsbo,fore,new_lt/house_type/75653871_zpid/40202_rid/85000-115000_price/310-419_mp/days_sort/39.057051,-94.349556,38.777105,-95.019722_rect/10_zm/0_mmm/