Shane Hursh Hour 7
Harper is a 25 year old woman who earns an annual salary of $70,000, before taxes. But she also has $35,000 in student loans, which accumulate at 6.8% interest, to pay off and a monthly car payment of $325. Nevertheless, she is eager to purchase a new home.
A full shot of the house that Harper intends on buying
A good Kitchen view of the structure
This is the present value equation Harper used to discover how much she would be paying monthly, over 30 years and with an APY of 4.635%, for a house with such a price.
After subtracting 30% of her annual salary for taxes, Harper earns about $49,000 a year, and $4,083 a month. Take away her car payments, and her student loans, which, as stated above, are to be paid back in 10 years with 6.8% interest, and she must pay another $325 and $402.78 per month, and she spends about $195 a month for food, making her leftover total monthly income around $3,160.22. Although, Harper is also human, and therefore reserves $1,000 a month for payments on gas, hanging out with friends, and an emergency fund, meaning at the end of the month, she has about $2,160.22 to spend on house payments.
Although with a $2,160.22 monthly payment, Harper could afford a mortgage as high as $419,527 over 30 years, she is opting instead to seek a somewhat cheaper $389,651 home in Olathe, meaning her minimum monthly payment will not have to be quite as high. Paying off a mortgage of that amount, with a 30 year APY of 4.635%, means she would have to pay a minimum of $2,006.38 per month. However, if she increased that monthly payment by 15%, she could save $87,778.30 and about 85 months of payments.