# Finding Home Sweet Home

### Marina Berkley, Hour 5 Precalc, Mrs. Stein

## Monthly Affordability

## After Monthly Car Payment...

## After Monthly Student Loan Payment...

R= $230.16

Jenny pays monthly payments of $230.16 to pay off her student loans of $20,000.

## After Monthly Living Expenses...

Groceries: $160

Clothing: $100

Gas: $140

Entertainment/Misc.: $50

Jenny's Total Monthly Expenses are $450

## Total Monthly PaymentsAdding together the monthly student loan payment and car payment gives the total amount of debt payments Jenny pays per month. | ## Monthly AllowanceAfter taxes and monthly payments, Jenny has a monthly allowance of $1,873.17 She forms her budget off of this. | ## Monthly Budget After taxes, monthly payments, and daily expenses, Jenny's net monthly allowance in which she can afford another payment (such as mortgage) is $1423.17. |

## Total Monthly Payments

Adding together the monthly student loan payment and car payment gives the total amount of debt payments Jenny pays per month.

## Monthly Allowance

After taxes and monthly payments, Jenny has a monthly allowance of $1,873.17

She forms her budget off of this.

## House Payment Affordability

## Rule of Thumb

**Mortgage payments**should be between 25%-30% of monthly gross income (before taxes). Some people say 28% is good and others say the goal is to keep it as near to 25% as possible.

**Total debt payments** including monthly housing costs and long term debts should be 36% or less of monthly gross income (before taxes).

## Theoretical Monthly Total Debt Payments No more than 36% of Jenny's gross monthly income should go towards her monthly debt payments. Of her $3,333.33 gross monthly income, she can afford to spend $1200.00 in her housing and long term debt payments. | ## Theoretical Monthly House Payment 25% of Jenny's gross monthly income should go towards her monthly housing payments. However, she wants to be fiscally responsible and account for her other monthly debt payments. | ## Monthly Amount Affordable Subtracting her existing monthly debt payments from the theoretical value (36%) shows how much Jenny can afford to spend each month on another payment, such as mortgage. The maximum monthly amount of mortgage payment she can afford is $739.84. |

## Theoretical Monthly Total Debt Payments

Of her $3,333.33 gross monthly income, she can afford to spend $1200.00 in her housing and long term debt payments.

## Theoretical Monthly House Payment

## An Interest Rate From Bank of America for a 30 Year Fixed Rate Loan is 4.625%

## The following are figures from online mortgage calculators

## Dream House

- Price: $119,900
- Address: 1009 W Wabash St. Olathe, KS. 66061

## Saving Time & Money

## Increased Principle

**Time: About 7 years & 1 month**

**Money: $27,451.07**

## 15% 15% of her minimum monthly payment is $92.47. | ## Increase by 15% To find a monthly payment that is increased by 15%, add 15% of $616.45 to $616.45. Increasing the minimum monthly payment by 15% means that Jenny would now pay $708.92 each month for her mortgage payments. | ## Total TimePlug in the new 15% increased payment, $708.92, for the rate in a PV formula, the total loan amount of the cost of the house, the interest rate, and leave time as a variable. The variable N stands for the amount of payments Jenny would pay for a certain amount of months. By dividing the product by 12 (months), we find that Jenny would pay her monthly payment for 22.86 years for the loan to be payed off with the increased rate. |

## Increase by 15%

## Total Time

Plug in the new 15% increased payment, $708.92, for the rate in a PV formula, the total loan amount of the cost of the house, the interest rate, and leave time as a variable. The variable N stands for the amount of payments Jenny would pay for a certain amount of months. By dividing the product by 12 (months), we find that Jenny would pay her monthly payment for 22.86 years for the loan to be payed off with the increased rate.

## Minimum Payment Total The amount that Jenny would actually spend in 30 years with her fixed interest rate and minimum monthly payments would be $221,922. | ## 15% Increased Payment Total If Jenny increases her monthly payments by 15%, then the total time to pay off her loan would be 22.86 years. The amount she would spend in the 22.86 years to get her loan payed off with 15% increased monthly payments of $708.92 would be $194,470.93. | ## Total Money Saved The total amount of money that Jenny would save in paying off her mortgage if she increased her minimum monthly payment by 15% is $27,451.07. |