# Finance Project

Colwell

## Scenario 3

Jenny went to college for two years, and then dropped out. Unfortunately, by the time she dropped out of college, she had \$20,000 in student loans. She has been working as a bank teller for the last three years. Her salary is \$40,000. She also has a car payment of \$230 per month. She is excited to buy her first home.

## Extra Requirements

Approximately 30% of your annual salary goes to taxes.

Student loans must be paid back in 10 years. The current interest rate on a student loan is 6.8%.

## After Requirements

After 30% of her annual income is given to taxes, she is left with \$28,000 per year, or \$2,333 per month. She pays \$230 on her monthly car payment and \$230 on her monthly student loan payment. After paying for these, her monthly income is \$1,873.17 per month, or \$22,478.04 per year. If she were to spend her entire yearly income on a 30 year loan, she could afford a house worth \$674,341.20.

## Summary

Her Annual Income is \$22,478.04. Her Monthly Income is \$1,873.17. The Total Amount of money she could borrow is \$674,341.20

## Interest Rate

When Jenny visited Bank of America, she discovered the APR of a 30 year fixed rate mortgage was 4.751%

## Minimum Monthly Payment

Jenny went looking for a house on the Reese & Nichols website and found a house in Overland Park priced at \$65,000. She loved it. She used her finance app on her graphing calculator and discovered with the 4.751% interest rate over 30 years, the Minimum Monthly Payment for this house would be \$339.11

Of course, Jenny can easily afford this due to her \$1,873.17 monthly income, so she decided she didn't want to pay the minimum. She is going to pay 15% more than the minimum. After some of her calculations, 15% more of \$339.11 is \$389.98. If she pays 15% more than the minimum, she is able to pay for the house and She Will Save 7.25 years, or 87 months. The minimum payment of \$339.11 over 360 months would accumulate to a total of \$122,079.60. The payment of \$389.98 over 273 months would accumulate to a total of \$106,464.54. So, if she increases her payment, She Will Save \$15,615.06.