Armin J Bogosian - Techie Aida Beltran - Summarizer Isaac Miranda - Techie Tanya Cardona - Organizer...
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Transcript of Armin J Bogosian - Techie Aida Beltran - Summarizer Isaac Miranda - Techie Tanya Cardona - Organizer...
Armin J Bogosian - TechieAida Beltran - Summarizer
Isaac Miranda - TechieTanya Cardona - Organizer
Team #4
25 year old graduate from Cal Poly Mechanical Engineer Starting salary $70,000 Salary increases 3% every year Has liquid assets for down payment Considering a 10 year period Location: Brea
SFR 1,300 s.f., 3 bed, 2 bath Purchase Price: $350,000 Down Payment: 3% or $10,500 Interest Rate: 5.5% Loan Type
FHA with MIP (mortgage insurance)
30 year fix Lender, Bank of America
Annual Taxes: $4,576.32 Annual Insurance: $800
Monthly Payment with Taxes, Insurance, and MIP: $2,500
ApartmentApartment 1245 s.f., 2 bedroom, 2 bath1245 s.f., 2 bedroom, 2 bath $1,000 security deposit $1,000 security deposit Annual rent increase of 3%Annual rent increase of 3%
Monthly payment: $2,000Monthly payment: $2,000
Buying End of year refund received from house
deductions is put away into a savings account compounded at 4%.
Appreciation is assumed to increase at 3% per year. (based on historical average appreciation rate)
Leasing Every month, $500 is put away into a savings
account compounded at 4%. Inflation/rent increases are 3%
How low does inflation rate have to go where rent makes better sense?
Scenario 1: In 5 years or less: renting is the better option In 5 years or more: buying is the better option
Scenario 2: Renting: Available $ amount to put into savings
decreases as payments increase Buying: Tax deduction increases as your monthly
payment goes up (as a result of interest write off)
Scenario 3: At 1% inflation rate, renting makes better
sense- UNREALISTIC 2% inflation rate or higher, buying is the
better option
Our calculations proved renting to be more financially beneficial over a 10 year period.
If, however you take into consideration the equity that is accumulated in our buying situation, then buying is obviously the better choice.
Equity is not considered a “liquid” asset until the property is sold or refinanced.
Office of Federal Housing Enterprise Oversight-historical appreciation rate: http://www.ofheo.gov/
Current Interest Rates: www.bankrate.com FHA-home loan information: www.hud.gov/ Wescom Credit Union- CD rates:
www.wescom.org/