Finance Project 2013

Hannah Nettelblad Hour 4

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.


References

1. Reece and Nichols Realtors. (2013, December 17). Retrieved from http://www.reeceandnichols.com/

2. Wells Fargo Bank. (2013, December 16). Today’s Mortgage Rates. Retrieved from https://www.wellsfargo.com/mortgage/rates/