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You decide to buy a house of $250,000 with a loan amount of $200,000 and you plan to sell the house in year 10. The
You decide to buy a house of $250,000 with a loan amount of $200,000 and you plan to sell the house in year 10. The lender offers the following three SAM choices with $5,000 origination cost for each choice:
- $200,000; 30 years; monthly payment; 0% interest rate; 50% of the appreciated value of the property in year 10. In addition, if the property is sold for a loss in year 10, the lender pays nothing.
- $200,000; 30 years; monthly payment; 3% interest rate; 50% of the changed value of the property in year 10
- $200,000; 30 years; monthly payment; 5% interest rate; 25% of the changed value of the property in year 10
The housing market conditions:
- Home price will appreciate 30% in total for the next 10 years;
- Home price will stay the same for the next 10 years
- Home price will decline 30% in total for the next 10 years
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