Project Proposal Economic Options for Purchasing a House Team 4 Shane Carlson Matthew Dwight Toan Duong.

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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 Understand different approaches to affording housing. Consider “beyond simulation” values.

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%

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.

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

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.