# Harper's House Purchase- Scenario 2

## Harper's Income

Harper's annual salary=\$70,000

Annual salary after (30%) income tax=\$49,000

Monthly salary after taxes= \$4083.3

Work Shown:

70,000 x 0.7= 49,000

49,000/12 = 4,083.3

## Monthly Expenses

Car payment of \$325 a month

Student loan (10 year term at 6.8%) of \$402.78 a month

Food (\$100/week x 52 weeks/12) at \$433.33 a month

Utilities at \$150 a month

Insurance of \$100 a month

Gas for car \$200 a month

Miscellaneous expense \$200 a month

Total monthly expense of \$1,811.11

Monthly salary after expenses and taxes= \$2,272.22

Work Shown

13,000/12=1,083.33

3,900/12= \$325 (car payment)

325+402.78+433.33+150+100+200+200=1,811.11

(monthly salary after tax and expenses)

\$4,083.33-\$1,811.11= \$2,272.22

## House Purchase

House Cost= \$119,950

10% downpayment of \$12,000

(Saved monthly income of \$2,000 for 6 months)

House is now \$107,955

Minimum Monthly Payment of \$545 for 30 years (at 4.48%)

Total payment is

\$545 (monthly payment) X 12 months X 30 years = \$196,200

Work Shown

119,950- 12,000=107,955

## Maximum Loan

Because Harper's monthly budget is \$2,272, she can afford a monthly payment of \$2,272 which would allow a loan of \$400,000. Even tho she can technically afford a loan of \$400,000 that doesn't mean she should take it. It would be better to borrow around \$200,000 and have some extra money in her monthly budget for savings.

At \$200,000 she would pay around \$1,010 a month. This is the most practical loan because if it was any higher she would barely have \$1,000 dollars to live on after expenses and payments. She needs to have money for unexpected expenses or emergences. She also couldn't invest in a retirement or savings account. Just because you can afford a loan doesn't mean you should take it. We have to factor in the fact that people save and invest money and may need money for miscellaneous expenses.

\$1,262 remaining for investments, savings or extra expenses.

Work Shown

\$4083-\$1,811= \$2,272

\$2,272- \$1,010= \$1262

## Minimum Payment Increased by 15%

New monthly payment of \$626.75 (15% increased)

Minimum payment

\$545 (monthly payment) X 12 months X 30 years = \$196,200

New Payment increased by 15%

\$626.75 (monthly payment) x12 months x 23 years= \$172,776

Time Saved= 7 years

Money Saved= \$23,424

Work Shown

\$545 x 1.15 = 626.75 (15 percent of the minimum payment)

30 years-23 years= 7 years

\$196,200- \$172,776= \$23,424

## Reference Slide in APA

Image: unknown, (2013, December 21). House for Sale [Monograph]. Retrieved from http://www.zillow.com/homedetails/821-E-Northview-St-Olathe-KS-66061/75606875_zpid/.