Armin J Bogosian - Techie Aida Beltran - Summarizer Isaac Miranda - Techie Tanya Cardona - Organizer...
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Armin J Bogosian - TechieAida Beltran - SummarizerIsaac Miranda - TechieTanya Cardona - Organizer
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
SFR1,300 s.f., 3 bed, 2 bathPurchase Price: $350,000Down Payment: 3% or $10,500Interest Rate: 5.5%Loan TypeFHA with MIP (mortgage insurance)30 year fixLender, Bank of AmericaAnnual Taxes: $4,576.32Annual Insurance: $800
Monthly Payment with Taxes, Insurance, and MIP: $2,500
Apartment1245 s.f., 2 bedroom, 2 bath$1,000 security deposit Annual rent increase of 3%
Monthly 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 optionIn 5 years or more: buying is the better option
Scenario 2:Renting: Available $ amount to put into savings decreases as payments increaseBuying: 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- UNREALISTIC2% 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/