Best Financial Advice

By Ben Pannell

Her financial situation

With all of the taxes and car payments taken out, it can be calculated that she will make $40,206.64 yearly while paying her student loan for the first ten years. Her monthly income will total $3,355.55. Once that has been completed, she will make $45,100 annually; her monthly total will come out to be $3,758.33. Unfortunately, more expenses will come to be relevant; she will have approximately $1,230 to pay monthly on typical items necessary such as water, food, gas, etc. When all is said and done, she will be bringing in $2,125.55 the first ten years, monthly. For the next 20 years she will have $2,528.33 a month.
All information regarding the house can be seen by clicking on the link on "Harper's House"

Calculations

The Rationale

Typically, the average American puts aside 1/3 on the monthly income. For Harper, she can afford $1185 a month for the first 10 years, and $1252.67 monthly after 10 years based on the 1/3 investment.


20% down payment has already been payed for by her parents, creating a $60,000 down payment. Therefore, she can afford to borrow 80%, that would be $240,000 that would fit perfectly with the amount she could pay each month when planning the mortgage.


Through US Bank, the interest rate would be at 4.125% for 30 years.


The minimal monthly payment would be $1164.00 for a home that costs $300,000 with a $60,000 down payment. This makes perfect sense financially because it is just under the 1/3 amount calculated; as many know, some expenses must be paid on things that are unexpected, so it couldn't hurt to pay a smaller amount than 1/3 to save some valuable money.


If the minimal monthly payment is increased by 15%, the payment would be $1338.60. Thus, the interest rate would be decreased according to US Bank. A 30 year plan has an interest rate of 4.125%, while the 20 year plan has a 3.875% rate. Thus, with a $1338.60 payment monthly, the time it will take will be about 22 years to complete, approximately a 3.95% interest based on the relative amount being paid each month. She would technically end up paying $425,435.95. With the 15% increase of the monthly payment, she would be paying approximately $369,142.10. An approximate savings of $56,293.85