Buying a New Home
Precalc Finance Project
In scenario 2, Harper has a $70,000 annual income. She needed to pay off a $35,000 student loan and a monthly car payment of $325.
The house I found was worth $199,900
The monthly income ends up being $4083.33 after taking out all of the taxes. Because we were taking out about 30% for taxes, multiplying the monthly income by .7 or 70% got us the income. After taking out the monthly payment of student loans and the car payment, the final monthly income adds up to be $3355.55
What can I afford to borrow
Harper can borrow $222,313.20 from the bank to buy a house. It was figured that if she was to put about 28% of her monthly payment towards paying off the house, she would have about $1143.32 to put towards that. The rest of her money would be used for any other expenses a person might need.
Interest rate and Minimal Monthly Payment
The average interest rate on a mortgage is 4.625%. The minimal monthly payment ends up being $1027.76, because the house cost less than the amount I could borrow from the bank.
What can be saved
By increasing the monthly payment on the house by 15% the payment increases to $1181.92. The amount of time to pay off the house changes to 22.86 years which then saves 7.14 years of having to pay off the house. With that amount of time change, it saves Harper $ 29,983.13.