Precalc Finance Project

Anna Olander

Scenario #3

"Jenny went to college for two years, and then dropped out. Unfortunately, by the time she dropped out of college, she had $20,000 in student loans with an interest rate of 6.80%. She has been working as a bank teller for the last three years. Her salary is $30,000. She also has a car payment of $400 per month. She is excited to buy her first home"

Monthly Salary

Jenny makes a salary of $30,000 and lands in the tax bracket of 15%, meaning she only takes home $25,500 a year or $2125.00 per month.

Student Loan Payment

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Since Jenny has $20,000 in student debt at a 6.8% interest rate, I calculated her monthly student loan payment which ended up being $230.16.

Monthly Budget Estimates

Transportation (car payment, gas, insurance)= $540

Student Loans: $230.16

Food: $270

Utilities: $200

Cell Phone: $80

Entertainment/Other: $200

Total Monthly Expenses: $1520.16

House Budget

Possible Monthly House Budget:

2125.00-1520.16= $604.84

What is Affordable...

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PV= $132,625.43

The 30 year fixed rate loan is 3.625% (Bank of America, 2/15). I will look for houses for Jenny around $120,000 so that I do not go over budget and have some wiggle room for other expenses.

House Hunting

While looking for houses $120,000 or less, I came across some very ugly houses. Luckily, I found a great looking one right near $120,000, actually costing $119,950 right in Overland Park, feeding into the Shawnee Mission School District.

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Actual Monthly Payment

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The actual (minimum) monthly payment is $547.03.

Amortization chart for first year:

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Over 30 Years...

547.03(12)(30)= 196930.80

196930.80-119950= $76,980.80 will be paid in interest.

If increased monthly payment by 15%...

New payment: 547.03+(547.03*.15)= $629.08

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t= 284.462217/12=23.7052

t= 23 years and 8 months

Difference in amount paid:



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