The Beijing Dream Case Solution

After deciding to buy a property, the couple is choosing a suitable apartment from three shortlisted ones. The couple has a four factor criteria for selection, namely, the desired location, proximity to work, services available and the size of apartment. Among the three shortlisted apartments, the best alternative that caters to all the constituents of the checklist is the Guoxing Guanhu Garden apartment. It has a suitable space and a preferred location coupled with all the required services. The other two apartments are attractive in a certain aspect, nonetheless, as a package they fail to deliver the desired utility as measured by the selection criteria. At the same time, the other apartments demand additional costs for interior decoration and related stuff. These costs, when coupled with the base case value, can substantially increase the cost of apartment.   

 The next step is to determine the loan type that best suits the couple. There are two choices available for mortgage, housing mutual funds and commercial bank loans. The rate offered by the commercial banks is high in comparison with the mutual funds rates. However, In the case of mutual fund, the sole contributor of mortgage, Shangbo, has not made enough contribution to match the mortgage amount. Also, Yingtai has no access to this funding source, which puts much burden on Shango alone to make the payments for the defined benefit contribution.  In the case of a commercial bank, there is a range of values from which the rates can be charged. The couple can take advantage of their parent’s financial assets in this case. If their parents guarantee the future mortgage payment, the rate charged by the bank can be minimized. Also, by not demanding monetary assistance from parents, there is quite a good chance that they will accept the couple’s offer of guarantee. At the same time, their family income and other statistics are in favor of offering them a discounted rate.