Finance Project

Ethan Miller

Maximum Monthly Payment of $1633.34

A common way to determine how much money Harper should spend on her home is to calculate 28% of her gross income of $70,000 which is a good estimate of how much money she can afford to spend on her home per year (Front-end Ratio). This leaves her enough money to pay her car payment and student loans along with other living expenses.

Maximum Borrow Amount of $317,682.25

Since Harper's recommended maximum monthly payment is $1633.34, her maximum borrow amount is $317,682.25 which is equal to a total of $588,000, including interest, over the course of 30 years.

Minimum Monthly Payment of $1542.42

Assuming Harper can make monthly payments of up to $1633.34 and she wants to get a 30 year fixed loan at 4.625% at Bank of America, she can afford a home up to $317,682.25. In order to pay off a home with the recommended price of $300,000 in 30 years with an interest rate of 4.625%, Harper has to make a minimum monthly payment of $1542.42.

By spending $1542.42 per month she has $2540.91 (after taxes) to spend on her monthly student loan payment of $402.78, monthly car payment of $325, and other living expenses she may have.

Increasing Monthly Payment by 15% saves $68,735.76 and 7.14 years

If Harper increases her monthly payment from $1542.42 to $1773.78 she will have paid off her $300,000 home in 22.86 years, effectively saving her 7.14 years. Over the 22.86 years Harper pays $1773.78 she spends $486,583.33 rather than spending $555,271.20 over the course of 30 years with monthly payments of $1542.42 on her $300,000 home.

Harper's Recommended Home of $300,000 in Olathe, KS.

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Bank of America. (n.d.). Mortgage rates and loans. Retrieved from

Reece and Nichols. (n.d.). 12913 reeder street. Retrieved from