House in Overland Park
PreCalc Finance Project
Brent the construction worker's income
Brent earns an annual salary of $60,000. Since 30% goes to taxes and he has a $450 a month car payment, that leaves him with a $42,000 salary. Dividing this into 12 months, this leaves Brent with $3,500 monthly. Subtract the $450 car payment, he has a max amount of $3,050 max amount he can spend on a house monthly.
Note: For the following calculations, the cost of food, insurance, clothing, and other necessities are not considered.
$169,900 house
Located in Overland Park, Kansas this 4 bedroom, 2 1/2 bath is one that Brent, a construction foreman, can afford. Found on Reese & Nichol's website, this house has a 4.75% interest rate, and the total payment he would make per month on the mortgage would be $1,247.
Present value equation
This present value will give Brent the maximum value of money he can borrow, which turns out to be $584,686.20 for a house.
Finding R
In this equation, we are finding how much money Brent would spend for a 30 year fixed rate loan. R is how much he borrowed per month, $881.58. This grand total comes out to be $317,368.
Increasing minimum monthly payment by 15%
It's no doubt that by increasing the minimum monthly payment by 15% that you save money and it takes less times to pay off the mortgage. By increasing it by 15%, Brent found that it would take 13.35 years to pay off and $229,726 to pay.
How much many and time did Brent save?
In the image to the left, we saw the amount that Brent would spend if he increased the monthly payment by 15%. By subtracting this total from the original, Brent would save $87,642. He would also save 16.65 years by doing this.
Works Cited
(2014, January 1). Reece & Nichols. Retrieved from http://www.reeceandnichols.com/homes-for-sale/KS/Overland-Park/66207/9350-Lamar-Avenue-109222967.