Finance Project

Carson Fournier

Hour 6

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


Additional 15%

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.


Jenny Is Happy with Her New Home

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References

(2013, December 31). Mortgage: Buy a Home. Retrieved from http://www.bankofamerica.com/home-loans/mortgage/overview.go.



(2013, December 31). Reece & Nichols: Home Match Retrieved from http://www.reeceandnichols.com/homes-for-sale/KS/Overland-Park/66204/7522-EBY-Avenue-106579763.

(2013, December 31). 7522 EBY Avenue, Overland Park, 66204 [Monograph]. Retrieved from http://www.reeceandnichols.com/homes-for-sale/KS/Overland-Park/66204/7522-EBY-Avenue-106579763.



(2013, December 31). Dollar Signs [Monograph]. Retrieved from http://blogs.mcall.com/.a/6a00d8341c4fe353ef0147e233487c970b-popup.