Beautiful New Home

Honors PreCalculus Finance Project By: Wyatt O. Hour 4

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)

The House

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


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.