Math 139H - Dream House Project PDF

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Summary

Professor: Rebecca Sparks...

Description

My Dream House In the future, I want to have a successful career as a school psychologist. With five years of experience, my annual salary will be approximately $61,000. My highest level of education will be a master’s degree and I will reside in Phoenix, Arizona. I chose to live in Phoenix, Arizona because it is located in the South West, where the weather is warm and sunny yearround. I am tired of New England weather! I looked for a house that costs between $250,000 and $300,000. I also considered the fact that I plan to have a spouse and one child at that point in time. Therefore, I chose a house that has 3 bedrooms and 2.5 bathrooms. I prefer a house that was built less than 30 years ago as well. It was important to have other special features, like a pool, driveway, and two-car garage. So, I picked this Spanish Colonial style house that costs about $270,000…

Traditional 30-Year Mortgage: If I were to put down 20% of the house cost, my down payment would be $54,000. I would be borrowing $216,000 over a 30-year period. With an APR of 4%, I would pay $1,031.22 per month. The total number of payments over this time is 360. The total amount of payments comes to $371,239.20. The total interest paid would be $155,239.20

PMI-Structured Mortgage: If I were to put down 10% of the house cost, my down payment would be $27,000. I would be borrowing $243,000 over a 30-year period. With an APR of 4%, I would pay $1,160.12 per month. The total number of payments over this time is 360. The monthly fee on PMI (private mortgage insurance) is $202.50, so the total monthly payment on the mortgage is $1,362.62

“5-15-80” Structured Mortgage: If I were to put down 5% of the house cost, my down payment would be $13,500. I would be borrowing $256,500 over a 30-year period. I owe $216,000 for the main mortgage (80%) with an APR of 4%. My monthly payment for the main mortgage is $1,031.22 (mentioned above). I owe $40,500 for the second loan (15%) with an APR of 7%. My monthly payment for the second loan is $269.45. At the end of 15 years, the balloon payment is $29,976.84. However, I would be able to avoid this balloon payment on the second loan if I pay $364.03 over a 15-year period.

Monthly Expenses: For my monthly living expenses, I created a list of necessities that are relevant to my life right now as well as what I will need in the future. Here are the following expenses…   

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My cell phone plan will be Straight Talk Wireless, which is about $45 per month. Since I will be married, the total cost will be $90 per month. I estimate that I will purchase gasoline for my car about once a week at about $20. In one month, this is $80. With two adults in the house, the total cost is $160 per month. The main streaming services that I would use are Netflix and YouTube TV. Netflix costs $12.99 per month with the standard plan, which offers HD videos and two simultaneous viewings. YouTube TV costs $49.99 per month, which provides over seventy different channels to choose from. All in all, the total cost will be $63 per month. The cost of heating and/or AC will be $208 per month. The cost of water usage will be $45 per month.

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The cost of sewer fees will be $25 per month. In order to feed my family and myself, I predict that I will spend $500 per month on food. The cost of clothing will be $200 per month. I believe that car insurance for two cars will cost me $196 per month. I would also love to have a dog, which includes food, veterinary check-ups, bedding, etc. So, the total cost will be roughly $125 per month. Finally, property taxes will cost about $144 per month.

Retirement: I would like to retire as a millionaire, so I calculated the amount of money I would need to save in order to do so. After receiving my master’s degree, I will be 24 years old and I plan to retire at the age of 69. I have about 45 years in which I need to make monthly payments of $189.59. I am surprised how affordable this appears to be, even with all of the other expenses that deduct from my monthly income.

Student Loans: I will complete my bachelor’s degree at Rhode Island College for psychology. Since I only accept the subsidized direct loan from this college, my student loan will be $14,000 ($3,500 per school year). With an APR of 5%, I plan to pay this amount in 5 years. I will complete my master’s degree at the University of Rhode Island for psychology as well. I estimate my student loan to be around $10,000 for 1.5 to 2 years in this program. With an APR of 6%, I plan to pay off this amount in 4 years.

Undergraduate Loan: At Rhode Island College, I will need to pay $264.20 per month. There will be a total of 60 payments over a time period of 5 years. The total amount paid will be $15,852 with $1,852 of that money being interest paid.

Graduate Loan: At the University of Rhode Island, I will need to pay $234.85 per month. There will be a total of 48 payments over a time period of 4 years. The total amount paid will be $11,272.80 with $1,272.80 of that money being interest paid.

Car Loan: My dream car would be a new 2019 Honda Civic Sedan, which costs approximately $22,000 altogether. With an APR of 5%, I expect to pay off this loan in 7 years. The total number of payments is 84, with each payment of $310.95 per month. The total amount paid over the term of the loan is $26,119.80 with interest paid being about $4,119.80

Can I Afford It?! To conclude, I think that I will be able to afford my future lifestyle, including my dream house, my dream car, and monthly living expenses. Considering I will have a husband and one child, I planned my future based on supporting a three-person family. Since I intend to have a spouse, I also doubled my average annual salary for my total budget. So, my monthly budget comes to $10,166.67. Due to my mortgage payment ($1,031.22), living expenses ($1,756), student loan payment ($499.05), car loan payment ($310.95), retirement savings ($189.59), and taxes/FICA/etc. ($3,050), approximately $6,836.81 will be deducted from my monthly income. Therefore, my husband and I have a remaining income of $3,329.86 per month. Personally, I believe this is a reasonable and logical financial plan for my future. In general, I am a rather frugal person when it comes to my personal finances and any related decisions that I make in regard to my hard-earned money. I am very happy with these results!

*Here is a formal breakdown of all monthly expenses:

Sources https://www.payscale.com/mypayscale.aspx?surveyId=06c658bf-52bf-43ec-8cbd6ed99389d04e&tab=personal

https://smartasset.com/mortgage/cost-of-living-calculator#951THdvm8N

https://automobiles.honda.com/civic

https://www.realtor.com/realestateandhomes-detail/2529-W-Alta-VistaRd_Phoenix_AZ_85041_M11615-13566

https://www.salary.com/research/cost-of-living/phoenix-az...