# Finance Project 2013

## Harper's First House

Harper has been out of college for two years and now manages a retail store earning \$70,000 each year. Her yearly net income after taxes is \$49,000 , or about \$4,080 per month. When she finished college she had accumulated \$35,000 in student loans that were to be paid back over ten years; this breaks down to be \$402 a month. She also has a \$325 monthly car payment and sets aside \$1,000 per month for cost of living expenses. This leaves Harper with \$2,355 a month that she is able to use on a mortgage payment. Her yearly income allows her to buy a house for \$383,400, but decides that she doesn't need a house that big and being more conservative with her first house will allow her to save money for her future. Her ideal price range for her first house is between \$250,000 and \$300,000, which would require a monthly payment of between \$1,500 and \$2,000. She finds the perfect house in Overland Park, Kansas that is listed at \$295,000.

## Mortgage Payments

Harper decides to buy this house and her 30-year fixed rate mortgage is approved with a 4.75% interest rate. She finds that the minimum monthly payment for this house is \$1538.85, which is exactly what she wanted to spend.

## The Monthly Breakdown

Harper's net income each month is \$4,083.33. She then must pay \$402.78 each month for her student loans and \$325.00 towards her car payment. She sets aside \$1,000 per month for food, gas, clothing, and other cost of living expenses. After the purchase of her first home, she also owes \$1538.85 per month for her mortgage. When all is said and done, Harper is left with \$816.70 every month and decides to put this money in a savings account for retirement.

## Increased 15%

If Harper were to pay a principle that was increased by 15%, her new monthly mortgage payment would be \$1769.67. If she decided that paying more each month was a good option for her, she would be able to pay off her mortgage in 22.7 years instead of 30. Overtime, she would end up saving \$71,927.87 by paying only \$230 more towards her mortgage each month.