# Finance Project

## 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.