Best Financial Advice
By Ben Pannell
Her financial situation
Calculations
The Rationale
20% down payment has already been payed for by her parents, creating a $60,000 down payment. Therefore, she can afford to borrow 80%, that would be $240,000 that would fit perfectly with the amount she could pay each month when planning the mortgage.
Through US Bank, the interest rate would be at 4.125% for 30 years.
The minimal monthly payment would be $1164.00 for a home that costs $300,000 with a $60,000 down payment. This makes perfect sense financially because it is just under the 1/3 amount calculated; as many know, some expenses must be paid on things that are unexpected, so it couldn't hurt to pay a smaller amount than 1/3 to save some valuable money.
If the minimal monthly payment is increased by 15%, the payment would be $1338.60. Thus, the interest rate would be decreased according to US Bank. A 30 year plan has an interest rate of 4.125%, while the 20 year plan has a 3.875% rate. Thus, with a $1338.60 payment monthly, the time it will take will be about 22 years to complete, approximately a 3.95% interest based on the relative amount being paid each month. She would technically end up paying $425,435.95. With the 15% increase of the monthly payment, she would be paying approximately $369,142.10. An approximate savings of $56,293.85