By: Luke Sells
I determined that an appropriate monthly payment on my house would be below $500. The amount I earn per month after taxes and a car payment is $3,050. To allow for plenty of money for food, gas, various utilities, and spending my ideal house payment is lower than $500.
With my annual salary after taxes being $42,000 it is suggested that you buy a house that is around three times your salary. With this in mind I decided my price range should be between $80,000 and $120,000. I decided to buy an $80,000 home because I am single and not looking to start a family. I spend most of my nights at the clubs and do not need a nice house. I decided to put down 10% initially and took out 30 year fixed rate home loan for $72,000.
With my $72,000 at an interest rate of 4.6% the minimum payment I can afford for the 30 year loan is $369.10. I figured this out using the finance app in my calculator. I put the N value as 360 because it is a 30 year loan with 12 payments per year. I put the interest rate value at 4.6% because that was the value that was posted for this week in the newspaper. I put the present value at 72,000 because that is the value of my loan. After all this information was in my calculator I solved for the PMT value. Over the 30 years of payments I will pay a total of $132,876.
If I were to increase my monthly payments by 15% I would be paying $424.47 per month. With monthly payments of this amount I would spend a total of $116,542.48 over a span of 22 years and 11 months. I would save myself $16,333.52 and 7 years and 1 month on my loan.
Sweet, K. (2013, December 28). Dollars and Sense Bank Rate Watch. The Kansas City Star, A11
Williams, K. (2013, December 30). Reece and Nichols. http://www.reeceandnichols.com/homes-for-sale/KS/Kansas-City/66106/5246-Woodend-Avenue-104043242#_