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Home Rent or Buy Analysis |
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Initial Assumption |
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After-tax rate of return on investments |
4.50% |
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Marginal tax rate |
32.00% |
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Estimated annual appreciation of home |
4.00% |
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Down payment on home |
0 down with VA loan
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Estimated closing costs |
$4,200 |
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Estimated purchase price of home |
$140,000
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Monthly rent |
$1,100 |
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Cost of Renting |
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Annual rent |
$13,200 |
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Renter's annual insurance premium |
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Total annual cost of renting |
$13,200 |
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Cost of Buying |
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Mortgage loan amount |
$140,000 |
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Annual interest rate |
6.500% |
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Term of mortgage
(years) |
30 |
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Monthly mortgage
payment |
$885
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Annual mortgage
payment |
$10,619
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Property taxes |
$825 |
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Homeowner's insurance |
$725 |
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Maintenance |
$900 |
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Opportunity cost of
buying |
$1,665 |
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Total cost of buying |
$14,734
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Less Adjustments: |
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Principal reduction
in mortgage |
$1,519
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Tax savings of
interest deductions |
$2,912 |
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Tax savings of
property tax |
$264 |
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Total adjustments |
$4,695
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Annual after-tax cost of home ownership |
$10,039 |
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Less: |
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Estimated annual
appreciation in value of home |
$6,800 |
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Net annual cost of home ownership |
$3,239 |
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