Finance Project - Scenario 2
Gavin Magee Hour 7
Affordable Home! Leawood South, Leawood
Harper can afford this beatiful estate in Leawood as her budget allows her to put a 20% down payment, allowing her to purchase a house up to $250,000, as this one is just within her price point.
Budget Per Month
Harper being 25 and a two year graduated student with a job, has 10 years of student loans to payoff, as well as car payments. She only has a totally monthly net income of 5,833.33, but when subtracting out her monthly dues, ($459- student loan $325- car payments) she has a budget and income of $5049.33. Given the fact that all that income will not solely go towards a house, its safe to say she will be able to afford something with a mortgage of $1,633.33 a month, as using 28% of her income towards mortgage it is at the maximum of her budget. 28% is a common percentage for mortgage as I researched what banks will commonly loan based off a person's income. With $1,633.33 as the maximum Harper should maintain a budget below this to stay financially stable.
How Much To Borrow?
A comfortable amount of money based on Harper's budget to borrow for a home is $215,000. I figured in that her living expensives in a conservative manner would round out to be near $2,000 a month, and if her maximum budget on a house a month is $1,633, she would still have around $2,200 leftover of extra income, for saving or other expenses.
30 Year Fixed Rate Loan
As of March 25, 2015 on the Capital Federal site, for a 30 year fixed rate loan it is 3.75%. (capped.mortgagewebcenter.com)
If Harper borrow's $215,000 for 30 years at an interest rate of 3.75% the minimum possible monthly payment is $995.70 with an approved mortgage. This payment would not be including insurance or taxes.
Increasing Minimum Payment
Increasing the montly payments by 15%, is calculated out to save Harper a total of $34,064 and a total of 6 years of payments.
In the first year of amortization of Harper's loan, she will have a yearly total payment of $11,948.40, of which $3,953.39 is applied to principal while $7,995 goes towards the interest, bringing the overall loan down from $215,000, to $211,046.
(2015, March 4). Retrieved from http://www.michaelhagen.com/homes/12753-Overbrook-Road/Leawood/KS/66209/48077657/?regformcomplete
True Blue Lending. (2012, January 1). Retrieved March 24, 2015, from https://capfed.mortgagewebcenter.com