# Pre-Calculus Finance Project

## Scenario

We have Brent. He's a construction worker who makes \$60K per year. About 30% of his income goes to taxes, and every month, he has a car payment of \$450. He has no other taxes or monumental payments such as school loans.

## How Much Can Brent Afford?

Since Brent has several taxes and payments, there are somethings that need to be deducted off his \$60K yearly salary. 30% of that number is \$18K, so that gets subtracted off. Also, with his monthly \$450 car payment, that's another \$5400 per year off his salary. That would leave him with \$36,600 per year, or \$3050 per month. However, what the project doesn't consider is other payments, such as insurance (car, health, and dental), food, recreation, cable, internet, cell phone plans, electricity bills, and heating and air bills. With all of these things considered, which is about \$10K, that would leave him with \$26.6K per year, or \$2216.67 per month.

## How Much Can Brent Borrow?

In general, people can afford to borrow just over twice their yearly salary, meaning Brent can borrow around \$120K-150K, considering interest rates on the mortgage.

## The House Brent Wants

Brent managed to find a house in Overland Park. The address is 12910 W 110th St, Overland Park, KS, 66210. It is selling for \$98.9K. Brent is fairly frugal, so he doesn't want anything outstanding, but he would like a nice house for himself and possibly a guest.

## Interest, Monthly Payments, and If the Payments were Increased

A standard interest rate today is 4.75% for a 30-year loan, and that's what Brent got on his house payment. 30 years multiplied by 12 payments per year is 360 total payments. \$98.9K divided by 360 is \$274.72 per month, but with the 4.75% interest, its \$287.77 per month instead. If he decided he wanted to pay 15% more than required each month, that would be \$330.94 each month instead, which would save him 4 years of payments!