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Project Proposal Economic Options for Purchasing a House Team 4

Project Proposal Economic Options for Purchasing a House Team 4. Shane Carlson Matthew Dwight Toan Duong. Goal. Determine best economic option for housing/retirement for average engineer in orange county Most popular options will be considered

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Project Proposal Economic Options for Purchasing a House Team 4

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  1. Project Proposal Economic Options forPurchasing a House Team 4 Shane Carlson Matthew Dwight Toan Duong

  2. Goal • Determine best economic option for housing/retirement for average engineer in orange county • Most popular options will be considered • Understand different approaches to affording housing. • Consider “beyond simulation” values.

  3. Scenario Constants • $500k House • $50k Salary, Increasing about $1k a year • General Federal Taxes/Breaks will be considered • Assess Economic Value after 30 years • No inflation effects • No down payment considerations • Same Interest Rate of 5% • All investments are 5%

  4. Scenario #1 – Fixed Rate Mortgage • Reasonable surplus funds will be determined for average engineer. Surplus funds will be used for housing or savings. • Funds will be used to determine lowest term mortgage possible. • All surplus funds during and after mortgage payments will be invested. • After 30 years, we will sell the house based on average orange county market appreciation. • We will determine amount saved via tax breaks for owning house in this manner. • We will determine total housing cost for 30 years.

  5. Scenario #2 – Gradual Increase Mortgage • Approach is nearly identical to fixed rate mortgage, except the payments will increase over time. • This will allow a lower initial payments, hopefully acquiring a shorter term lease, paying less money to the bank. • This is a close alternative to Fixed Rate

  6. Scenario #3 – Interest Only Mortgage • All 30 years of this experiment the buyer will pay interest on a house. • The equity from that house will be cashed in after 30 years.

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