Pre-Calc Finance Project
Romin Patel
Scenario
Brent is a construction foreman who did not attend college. He is 24 years old, and earns an annual salary of $60,000. He has a car payment of $450.00 each month. He wants to buy his first home in the next few months.
Monthly Amount
After Taxes-$42,000 (Including Fed, SS, Medi, and State)
Monthly Income-$3500
Monthly Expenses:
- Car Payment-$450 (12.86%)
- Food-$350 (10%)
- Savings-$350 (10%)
- Clothing-$175 (5%)
- Entertainment-$175 (5%)
- Personal Expenses-$175 (5%)
Total Expenses per Month-$1675
Net Monthly Income-$1825
Total Amount
House Mortgage and Bank of Blue Valley
After finding his budget for his new house, Brent began to look for houses on zillow.com. He found his dream house at 10524 Mohawk Ln, Leawood, KS 66206. With a list price of 239,900. Unfortunately, he wasn't able to pay for the house with his own money so he had to take out a mortgage. Brent went to Bank of Blue Valley. He applies for a 30 year fixed rate loan at 4.375%(as of 12/17/13 at 1:50 PM ET). After using the present value (PV) formula, Brent found that his minimum monthly payment would be $1197.79, under his net monthly income of $1825.
Increased Principle
If Brent decides to increase his monthly payments by 15% from $1197.79, his new monthly payment will be $1377.46. By increasing his payment, he will save 6.92 years, paying off his mortgage in 23.08 years. As a result, he will save $49,703.08 by increasing his monthly payment only 15% per month!
References
10524 Mohawk Ln, Leawood, KS 66206 is For Sale - Zillow. (n.d.). Retrieved from
http://www.zillow.com/homedetails/10524-Mohawk-Ln-Leawood-KS-
Cost-of-Living Reality Check-Kiplinger. (n.d.). Retrieved from
http://www.kiplinger.com/article/spending/T050-C006-S001-cost-of-living-reality-
Smiling Construction Worker - In Working Clothes Royalty Free Cliparts, Vectors, And Stock
Illustration. Image 12788503. (n.d.). Retrieved from
http://www.123rf.com/photo_12788503_smiling-construction-worker--in-working-
Wells Fargo. (n.d.). Retrieved from
https://www.wellsfargo.com/mortgage/buy/tools/rate_calc_results
Retrieved from http://i.telegraph.co.uk/multimedia/archive/01001/ym-financial-