# Finance Project

## Jenny's Monthly Income

Jenny brings in a salary of \$40,000. After taxes, which are 30%, Jenny's annual salary comes to be \$28,000, or \$2333.33 a month. However Jenny still has to pay monthly costs for her student loan as well as her car payment. Jenny's student loan calls for a \$230.17 payment per month determined by the finance app and her car payment calls for a \$230 payment per month. After Jenny's other payments her total monthly income is \$1873.16, or \$22477.92 for the year.

## Logical Action

Since Jenny makes a total of \$1873.16 per month it wouldn't be very smart of her to spend all this towards her house because she would have no other money for her daily needs. Jenny decides to save \$1100 of this for her daily needs leaving her \$773.16 a month to spend on her house (maximum monthly payment).

## Interest Rate

Jenny found out on the Bank of America website that she could get a 30 year fixed mortgage rate of 4.625%. Using the finance app, she determined that given this rate, the maximum price she could afford is \$150,379.42 with her monthly payment of \$773.16.

## Jenny's New Home

Jenny decided on this great \$115,000 house she found on the REMAX website. She felt it would be smart to not push her maximum price so she bought this small, but perfect home. With her new home priced at \$115,000, Jenny is only forced to pay a minimum monthly payment of \$591.26. She determined this amount by plugging her information into the finance app using an "N" value of 360 (12 payments a year * 30 years), an interest rate of 4.625% (from Bank of America), a PV value of \$115,000 (price of house), and then solved for her monthly payment amount.

## Increasing the Payment

If Jenny were to increase her monthly payment of \$591.26 up by 15%, she would now pay \$679.95 a month for her home. With her old payment, Jenny was paying a total of \$212,853.60 for her house over 30 years. With the 15% increase, Jenny would only have to make 275 payments as determined by her finance app, cutting off a little over 7 years of her payment, and only spend a total of \$186,986.25. It would be best for Jenny to pay this 15% increase because in the long run it saves her 7 years off her payments and \$25,867.35 total.

## References

(2014, January 1). 12930 W 108th Street, Overland Park, KS 66210. Retrieved from http://www.remax-midstates.com/Home/12930-W-108th-Street-Overland-Park-KS-66210/HRT/1812798/.

(2014, January 1). 12930 W 108th Street, Overland Park, KS 66210 [Monograph]. Retrieved from http://www.remax-midstates.com/Home/12930-W-108th-Street-Overland-Park-KS-66210/HRT/1812798/.