# Beautiful New Home

## Brent's Life Expenses & Buying a Home

Brent makes \$60,000 annually at the job he currently occupies. After Uncle Sam and the car dealership get their hands on some of his hard earned money, he is left with \$36,600. Brent's monthly budget breakdown looks something like this -

Food and Water: \$325

Entertainment: \$175

Cell Phone: \$90

Retirement: \$250

Insurance (Home, Car, Health): \$350

Internet/Cable: \$50

Utilities (Gas, Electric, Water): \$100

Home Owners Association Fees: \$22

It costs Brent \$1,362 per month for this less than extravagant lifestyle, so he has \$20,256 left for a home at the end of the year. Divided by 12 to get the monthly payment; Brent can pay \$1,688 a month. Brent can get a 4.5% interest rate from Bank of America for a 30 year fixed mortgage. Brent's price range is from about \$320,000-\$340,000.

PV=(1,688 ( 1− (1+(.045/12))^−360)/(.045/12)

PV=\$333,145.64 (the total amount he can afford)

## Increasing the Principle

What if Brent was able to pay 15% more per month. That would be a monthly payment of \$1,941.20.

328,000=1ˏ941.20 ( 1− (1+(.045/12))^−n

n=268.26

268.26/12(monthly payment)=22.355 years

Brent would be able to pay off his mortgage in 22 years 4 months and a week! He would save just under 8 years of payments. \$1,688x12(months)x7.645(years)=\$154,857.12 in savings.