Renting Versus Owning

RENT VS. BUY

This exercise is designed to help ascertain the difference between paying rent and purchasing a home. It is presumed the buyer is in the 28% tax bracket. Please consult with your accountant before entering into a binding contract in order to determine if these calculations are valid for you.

RENT                                                                       PURCHASE

 3 bedroom 1.5 bath Townhouse                                  3 bedroom 1.5 bath Townhouse

 $1000 per month                                                         Price  $175,000

 $2000 move in expense (rent + security)                      $13,750 Down payment/closing cost

 $30 monthly renters insurance (contents)                      $997 Mo. Mortgage Payment*

 $12,360 annual rental expense                                     $40 hazard insurance

                                                                                    $250 Property tax

                                                                                    $110 PMI

                                                                                    $1397 Total Monthly Payment

                                                                                    $1500 avg. annual maintenance

$18,264 annual cost to own

TAX BENEFITS FOR RENTING                            TAX BENEFITS FOR OWNING

 $60 annual renters credit                                              $9900 annual interest payment

                                                                                    $3000 property taxes

                                                                                    $12,900 x 28% tax bracket

                                                                                    $3612 Annual Tax Savings

                                                                                 LOAN PAYDOWN/APPRECIATION

$2964 Equity gain (loan paydown)

$6125 annual appreciation (3.5%)**

TRUE COST TO RENT                                           TRUE COST TO OWN

 $12,360 Annual cost to rent                                         $5563 Annual cost to own

 $1030 per month                                                         $463.58 per month

* based on a 30 year mortgage at 6% interest.

** Rate of appreciation could be higher or lower in any given year.