Harper's House Purchase- Scenario 2
By Connor Leimer hr.5 Stein
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
Harper's House
Student Loan
Recommended loan of $200,000
House Purchase
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 Monthly House Payment
Difference of Time (15% increase)
Maximum loan of $400,000
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
Website: Unknown. (2013, December 21). Zillow. Retrieved from http://www.zillow.com.