Pre-Calc Finance Project

By: David Campbell

Jenny's Situation #3

Jenny is looking to buy a new home, she has $20,000 of student loans, a $230 monthly car payment, and she brings in a $40,000 salary.

Monthly Amount

Jenny has a $40,000 salary, when the 30% of taxes is deducted she has a remaining $28,000. Then when you subtract her monthly car payment of $230, she has $25,240 remaining. To account for her student loans, she must pay $230.16 monthly as a minimum payment to reach her 10 year requirement at 6.8% interest, this leaves Jenny with $22,478.08 remaining after her expenses are deducted from her salary. After dividing the $22,478. 08 by 12 (months) she has about $1800 that can be put toward the house, but realistically she should only $1000 monthly payment which allows he to buy a house from $0-$150,000.

Borrowing Money and Monthly payment

Jenny chooses to get her loan from Bank of America, assuming that she is approved for the 30-year fixed, her rate would be 4.625%. She can afford to get a $140,000 loan, she would have a minimum monthly payment of $719.80.

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Increased Principle

If Jenny increased her $719.80 monthly house payment by 15% she would be paying $107.97 more which is a total of $827.77 per month. Jenny would then have payed off her loan 7 years or 85 months earlier then if she had not increased her monthly payment by 15%. Before Jenny would have payed a total of $259,128, after her payment increase she would pay only $227,048.21. By increasing her monthly payment 15% Jenny could save $32,079.79.

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APA Citation

Bank of America Corporation. (2014). Mortgage: Buy a Home. [ONLINE] Available at: [Last Accessed January 1, 2014].