Assume that you have found a home for sale and have agreed to a
purchase price of $254800$254800.
Down Payment: Assume that you are going to make a
10%10% down payment on the house. Determine the amount of your down
payment and the balance to finance.
Down Payment=$Down Payment=$
Loan Amount=$Loan Amount=$
Monthly Payment: Calculate the monthly payment for
a 30 year loan (rounding to the nearest cent, so rounding to two
decimal places). For the 30 year loan use an annual interest rate
of 4.27%4.27%.
First, express the annual interest rate as a decimal.
The annual interest rate expressed as a decimal isThe annual
interest rate expressed as a decimal is .
Now use the loan formula to find the monthly payment, dd. The loan
formula solved for dd is:
d=P0(rk)(1−(1+rk)−Nk)d=P0(rk)(1-(1+rk)-Nk)
P0P0 is the original loan amount.
rr is the annual interest rate in decimal form.
kk is the number of compounding periods in one year (so
k=12k=12).
NN is the length of the loan in years.
Monthly Payment:d=$Monthly Payment:d=$
Assuming you make the monthly payment each month for 30 years, what
will be the total amount repaid?
Total payments=$Total payments=$
Find the total amount of interest paid over the 30 years. To do so,
subtract the amount originally borrowed from the total
payments.
Total interest paid=$Total interest paid=$
Calculate your Income: As already mentioned, these
payments are for principal and interest only. You will also have
monthly payments for home insurance and property taxes, but for
this lab you will ignore those. In addition, it is necessary to
have income leftover for other expenses like electricity, water,
food, and other bills. As a wise home owner, you decide that your
monthly principal and interest payment should not exceed 35% of
your monthly take-home pay so that you have plenty left over for
those other expenses.
What minimum monthly take-home pay (i.e. your monthly pay checks
after taxes) should you earn in order to meet this goal? In other
words, 35% of what monthly take-home pay is equal to your mortgage
payment?
Minimum monthly take-home pay=$Minimum monthly take-home
pay=$
It is also important to note that your net or take-home pay (after
taxes) is less than your gross pay (before taxes). Assuming that
your net pay is 73% of your gross pay, use your monthly take-home
pay to find the minimum gross monthly salary will you need to
afford this house.
Minimum monthly gross pay=$Minimum monthly gross pay=$
Now find the minimum annual gross pay you will need to afford this
house.
Minimum annual gross pay=$Minimum annual gross pay=$
| Purchase price | $254,800 |
| Down Payment | 10% |
| Down Payment | $25,480 |
| Loan Amount | $229,320 |
| The annual interest rate | 0.0427 |
| P0 | $229,320 |
| r | 0.0427 |
| k | 12 |
| N | 30 |
| Monthly Payment 'd' | $1,130.80 |
| Total payments | $407,088.00 |
| Total interest paid | $177,768.00 |
| Minimum monthly take-home pay | $3,230.86 |
| Minimum monthly gross pay | $4,425.84 |
| Minimum annual gross pay | $53,110.08 |
| Purchase price | 254800 |
| Down Payment | 0.1 |
| Down Payment | =B1*B2 |
| Loan Amount | =B1-B3 |
| The annual interest rate | =4.27%/1 |
| P0 | =B4 |
| r | =B6 |
| k | 12 |
| N | 30 |
| Monthly Payment 'd' | =PMT(0.0427/12,12*30,-229320) |
| Total payments | =1130.8*12*30 |
| Total interest paid | =B12-B7 |
| Minimum monthly take-home pay | =1130.8/35% |
| Minimum monthly gross pay | =3230.86/73% |
| Minimum annual gross pay | =4425.84*12 |
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