Group 5 Tony Duong - Organizer Paul Sibbett - Techie Behrooz Falsafi - Summarizer

Fixed Vs. Adjustable Home Loans Which plan best fits a engineer with a job? Which plan has a better monetary value in the long-run (retirement)? How does each type of loan work? Which one fits your salary the best?

Scenario A engineer with a bachelor’s degree has been working for 2 years, and wants to buy a house, but is unsure of which type of available loan fits him best.

Assumption The house is in the range of about $300,000. The person has saved up approximately $15,000. They are currently making about $55,000 with a 5% raise each year.

Variables Involved Current fix interest rates on home loans Current adjustable interest rates on home Inflation Longevity of the loan (15,20, or 30 years?) Down-Payment Income Credit History

Fixed loans for a 30 year plan First 23 years, more interest is paid off than principal. Larger tax deductions. Inflation increase, mortgage payments become a smaller part of overall expenses.

Adjustable loans for a 30 year plan Interest rate remains the same for a fixed period The rate rise at fixed interval. (.05 to 2 percent) Advantage: The option of refinance when fixed rates get better. Lower initial interest rate than a fixed mortgage. Qualify for a larger loan.

Resources Loanentry.net Loansearch.us