Brent's Finances
By: Kristen Xu, Hour 5, Stein
Scenario #1
24 year old Brent has no college loans, but does have an income of $50,000 and a $23,000 car with a 6.5% 5 year car loan.
Salary per Month After Tax
Per month: 41,706.25/12= $3475.52
Car Payment
23,000=R((1-(1+(.065/12))^-60)/(.065/12))
23,000=R(51.10867958)
R=$234.79
Monthly Budget
Car Payment: $234.79
Food: $311.60
Utilities: $367.96
Cell Phone: $73
Gas(comes from the two websites above)/entertainment: $358.50
Other: $100
Total Monthly Expenses: $1737.47
Budget for House
Mortgage Interest Rate: 5.25%
What can I afford?: PV=1738((1-(1+(.0525/12)^(-12*30)))/(.0525/12))
PV=(1738.09(181.0925925)
PV= $314,755.22
Brent should buy a house that costs $300,000 so he won't max out his budget.
A 30 Year Fixed Rate Loan
300,000-60,000=R((1-(1+(.0375/12))^-12*30)/(.0375/12))
R= $1,111.48
First Year Amortization Table
1 | 1,111.48 | 750 | 361.48 | 241,861.48
2 |1,111.48 |755.82 | 355.66 | 243,728.78
3 |1,111.48 |761.65 | 349.83 | 245,601.91
4 |1,111.48 |767.50 | 343.98 | 247,480.90
5 |1,111.48 |773.38 | 338.10 | 249,365.75
6 |1,111.48 |779.27 | 332.21 | 251,256.50
7 |1,111.48 |785.18 | 326.30 | 253,153.16
8 |1,111.48 |791.10 | 320.38 | 255,055.74
9 | 1,111.48 |797.05 | 314.43 | 256,964.27
10|1,111.48 |803.01 | 308.47 | 258,878.76
11| 1,111.48 |809.00 | 302.48 | 260,799.24
12| 1,111.48 |815.00 | 296.48 | 262,725.72
Increasing the Minimum Monthly Payment by 15%
240,000=1278.19((1-(1+(.0375/12))^-12*t)/(.0375/12))
T=22.69
It would take around 22 years and 8 months with the increase in monthly payments, so it would save 7 years and 4 months.
To find how much money is paid with the original payment, you multiply it by 12 (the number of months in a year) and 30 (the total amount of years Brent will be paying). As a result, you get $400,132.80.
1111.48(12)(30)=$400,132.80
To find how much money is paid with the increased payment, you multiply it by 12 (the number of months in a year) and 22 (the amount in years Brent is paying). You must then add $1,278.19 (the payment) multiplied by 8 (the number of months not included in the amount of years.
(1278.19(12)(22))+(1278.19*8)=$347,667.68
To find how much is saved, you subtract the new value from the old:
400,132.80-347,667.68=$52,465.12
Brent would same 7 years and 4 months and $52,465.12 if he increased his minimum monthly payment by 15%.