Harper's Finances

Shane Hursh Hour 7

The Scenario

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.

Harper's Dues

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.

The House

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.

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Lynch, M. (2013, December 18). Bank of America. https://www.bankofamerica.com/

(2013, December 18). Reece and Nichols. http://www.reeceandnichols.com/