#4.xls - RENT-OR-BUY ANALYSIS A COST OF RENTING 1 Annual...

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RENT-OR-BUY ANALYSIS A. COST OF RENTING 1. Annual rental costs ( 12 × monthly rental rate of $ 725.00 ) $ 8,700.00 2. Renter’s insurance 275.00 3. Opportunity cost of security deposit: $ 725.00 × after-tax savings rate 0.040 29.00 Total cost of renting (line A.1 + line A.2 + line A.3) $ 9,004.00 B. COST OF BUYING 1. Annual mortgage payments (Terms: $ 175,000.00 , 360 months, 6 %) $ 12,590.56 ( 12 × monthly mortgage payment of $ 1,049.21 ) 2. Property taxes 4,625.00 ( 2.5 % of price of home) 3. Homeowner’s insurance 925.00 ( 0.5 % of price of home) 4. Maintenance 1,295.00 ( 0.7 % of price of home) 5. After-tax cost of interest on down payment and closing costs 560.00 ( $ $ 14,000.00 × 4.0 % after-tax rate of return) 6. Total costs (sum of lines B.1 through B.5) $ 19,995.56 Less: 7. Principal reduction in loan balance (see note below) $ 2,090.56 8. Tax savings due to interest deductions* 2,625.00 (Interest portion of mortgage payments
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