Mortgage Project

Clare Bullock

The Budget

The equation below gives the max price that Brent can afford with a monthly mortgage payment at 25%.
148,306.05=762.50(1-(1+.04625/12)^-360)/(.04625/12))

Yearly Income: 60,000$

Yearly Income After Taxes: 42,000$

Monthly Income: 3,500$

Monthly Income After Car Payment: 3,050$

25% of his monthly income, or the recommended amount to spend on housing, is 762.50.

PAYMENTS

Bank of America offers a 30 year fixed rate of 4.625%, or 4.760% APY.


An average monthly mortgage payment is around 25%, so the ideal monthly payment is about $762.50. This leaves $2,287.50 for other spending, or 75% of the monthly income.

Brent's Home

The house featured above costs $144,900. After paying the down payment he has decided to finance the other 130,410. The interest rate provided by Bank of America for a 30 year fixed rate is 4.625%. This taken into account, Brent's monthly payment should be $670. 49. This comes in at a little less than 25% of his monthly income ($762.50) which gives him a little over 75% for other spending.


Cost of Home: $144,900

Loan Amount: $130,410 (After a 10% down payment)

Interest: 4.625% (30 year fixed rate)

Monthly payment: $670.49


Increase in Mortgage Payment

If Brent was to decide that he wanted to increase his mortgage payment by 15% then his monthly cost would increase to $788.80. However it would save him $140,282.51, and 19 years and 3 months.


Citations

(2014, January 1).Mortgage: Buy a Home. Retrieved from https://www.bankofamerica.com/home-loans/mortgage/overview.go

(2014, January 1).Description for 8145 Hadley Street Overland Park, KS 66204. http://www.reeceandnichols.com/homes-for-sale/KS/Overland-Park/66204/8145-Hadley-Street-93896823