# Harper's House Finance Overview

## Scenario 2:

Salary \$70,000

Taxes 30% of salary

Student Loans \$35,000

Car Payments Per Month \$325

Living Expenses Per Month \$900

## Beginning Steps:

Harper makes \$70,000 per year. She first figured out how much she had per month after taxes which came to \$49,000. Harper divided that by 12 to figure out how much she had per month, which came to \$4,083.33. Then she figured she would need to take out \$900 for living expenses such as food, clothes, and other necessities. Harper also needed to take out \$325 per month for car payments. Harper had \$2,858.33 after taxes, car payments and living expenses to spend per month.

## Student Loans:

Harper had \$35,000 in student loans. Using the finance app in the calculator she figured that each month she would have to pay \$402.78. Taking her \$2,858.33 per month (after taxes, car payment, living expenses), she would deduct the monthly student loan expense. Harper was left with \$2,455.55 per month to find a house.

## Finding A House:

Harper figured that she had \$2,455.55 to spend on a house. Taking into consideration the mortgage rate (30 year fixed loan on December 31, 2013) was 4.625%, Harper could afford \$477,603.86. She decided it wasn't wise to spend all of her money on a house so she looked for houses in the \$200,000-\$300,000 range. Harper fell in love with this four bedroom house in Olathe. Fortunately, it was already up to date so she would not have to worry about setting aside money for renovations. It was large enough to start a family in and it was in a safe location with great schools.

## Saving For the Future:

Because Harper didn't spend all leftover money on the new house of her choice, she calculated that instead of paying monthly payments of \$2,455.55 she could pay \$1,542.16 per month. With the difference of \$913.39, she put that money into a retirement account for later on.

## Increasing Monthly Payments By 15%:

She began to think why not increase monthly payment so that she would not have to spend so much money in the end. Increasing her monthly payments 15% it came to \$1773.48 per month. If she payed 15% more per month it would only take her 22 years and 11 months to pay off the mortgage, instead of 30 years.

## Weighing Her Options

Harper's first option is to pay \$1,542.16 per month for 30 years. With the first option she would be paying \$555,177.60. With the second option she will increase her monthly payment by 15%, instead paying \$1,773.48 for 22 year and 11 months. With the second option she will pay \$497,352.30 after the 22 years and 11 months. In the end option two is better because she can afford to pay 15% more per month and this will save her \$67,825.30. Also Harper, will pay off the mortgage in 22 years 11 months instead of 30 years, saving 7 years and 1 month payment that can be spent on other things or saved.