Finances
EMI Formula
$$ EMI = \frac{P \times r \times (1 + r)^n}{(1 + r)^n - 1} $$
EMI for 7.5% interest rate for a principal amount of $500,000 Over 30 Years
$$ r = \frac{7.5}{100 \times 12} = 0.00625 $$
$$ EMI = \frac{500000 \times 0.00625 \times (1 + 0.00625)^{360}}{(1 + 0.00625)^{360} - 1} \approx 3,507.24 $ $$
Comparison table
| Principal | Rate | EMI | Total Amount | Total Interest Paid | Principal % Paid as Interest |
|---|---|---|---|---|---|
| $500,000
|
7.5% | $3,507.24 | $1,262,606.40 | $762,606.40 | 152.52% |
| 7% | $3,320.98 | $1,195,552.80 | $695,552.80 | 139.11% | |
| 6% | $3,219.64 | $1,079,190.00 | $579,190.00 | 115.84% | |
| 5% | $2,684.11 | $966,279.60 | $466,279.60 | 93.26% | |
| 4% | $2,387.08 | $859,348.80 | $359,348.80 | 71.87% | |
| 3% | $2,108.02 | $758,887.20 | $258,887.20 | 51.78% | |
| 2% | $1,849.14 | $665,690.40 | $165,690.40 | 33.14% |
Affording a house (75/15/10)
- 75% - should be able to cover mortgage, property taxes, insurance(health, car, home), groceries, vacations, clothes, food
- 15% - Investing : Power of Compound Interest
- 10% - Saving
For a 30 years loan, the first 14 years and 8 months of the mortgage is the interest. that means the equity is not made
Federal Income Tax: The U.S. federal income tax is progressive, with rates ranging from 10% to 37% in 2024.
- Average effective federal tax rate is 22% for mid-to-high earners.
Colorado State Income Tax: Colorado has a flat income tax rate. For the 2024 tax year, this rate is temporarily reduced to 4.25%
| Gross Salary | Estimated Taxes (26.25%) | Take-Home Pay (73.75%) | 75% Essentials | 15% Investing | 10% Savings | Max EMI Affordability (50% of Essentials) | Monthly EMI Affordability |
|---|---|---|---|---|---|---|---|
| $100,000 | $26,250 | $73,750 | $55,313 | $11,063 | $7,375 | $27,656.25 | $2,304.69 |
| $125,000 | $32,813 | $92,188 | $69,141 | $13,828 | $9,219 | $34,570.31 | $2,880.86 |
| $150,000 | $39,375 | $110,625 | $82,969 | $16,594 | $11,063 | $41,484.38 | $3,457.03 |
| $200,000 | $52,500 | $147,500 | $110,625 | $22,125 | $14,750 | $55,312.50 | $4,609.38 |
| $250,000 | $65,625 | $184,375 | $138,281 | $27,656 | $18,438 | $69,140.62 | $5,761.72 |
| $300,000 | $78,750 | $221,250 | $165,938 | $33,188 | $22,125 | $82,968.75 | $6,914.06 |