Finding an Affordable Home
Honors Pre-Calculus Finance Project
Affordable Monthly Income: $2,145.55
After factoring in the following deductions of 30% for taxes, $325 per month for car payment, $402.78 per month for student loans on a 10 year fixed interest rate of 6.8%, and roughly $940 for monthly expenses, I was left with $2,145.55 as my fitting monthly payment.
Housing Limits and Rates
Most I Could Afford
If I chose to use my entire monthly income ($2,415.55) as my monthly mortgage payment, which wouldn't be wise, I would be able to buy a house worth up to $471,194.10 with an interest rate of 4.6% on the mortgage loan for 30 years. Leaving myself with no money leftover for take-home pay could end up being very disastrous should a financial emergency occur since there would be no funds to cover the costs of this unexpected expense.
Realistic Price I Could Afford
Knowing that my variable expenses may differ each month, and also anticipating future taxes and insurance on my house, I'm going to look for a home with a 30 year note that only takes up half of my remaining disposable income. Given that, my monthly mortgage payment would end up being $1,207.78 (half of my monthly income) allowing myself to buy a house worth up to $235,598.02 with an interest rate of 4.6% on the mortgage loan for 30 years which is much more affordable for my budget.
House I am Purchasing: $158,250
1005 N Sunset Dr Olathe, KS 66061
3 beds, 2 baths, 1,136 sqft
This house is not only under my price range, it is move-in-ready with new stainless steel kitchen appliances, hardwood floors, updated bath fixtures, and an attached garage. Having a house under my price range allows me the possibility of paying above the minimum monthly mortgage payment available and paying off my mortgage sooner than 30 years.
Minimum Monthly Mortgage Payment
The house that I am purchasing costs $158,250 and with a 4.6% interest rate on the mortgage loan for 30 years, my monthly mortgage payment adds up to be $811.26, an affordable amount for my budget. However, this payment is not idealistic since I have up to $1,207.78 per month to comfortably pay off this mortgage loan. A higher payment per month would help me save money and help pay my house off faster in the long run.
Increasing the Monthly Payment by 15%
New Monthly Mortgage Payment: $932.95
By increasing my original monthly mortgage payment by 15%, my new payment becomes $932.95 per month. This not only saves me $35,902.80 in the long run, it also cuts off 7.12 years out of the original 30 years to pay off my mortgage. This would be the smarter payment to choose since my budget still allows me to afford this higher monthly mortgage payment comfortably.