A potential buyer has visited a brokerage to talk to an agent about the pros and cons of buying a home vs. renting one. You, the agent, asks the potential buyer questions about the buyers income, price range, down payment ability, and current rent costs.

• Fill out the Renting vs. Buying worksheet using the information below to help determine whether renting or buying makes more sense for the potential buyer at this time.
• Once you've completed the worksheet, save as a Word doc or pdf and attach to your post.
• Explain whether this particular buyer should continue renting or purchase a home.

Current monthly rent: $1,300

• Income tax bracket: 28%
• Proposed purchase price: $250,000
• Proposed down payment: 10%
• Loan term: 30 years
• Interest rate: 7%
• Closing costs: $7,500
• Estimated appreciation rate: 3%
• Yield on money not spent on a down payment: 4%
• Property taxes: $3,800
• Homeowners insurance: $900
• PMI: $78/month

Calculations: Determining the principal and interest payment requires a financial calculator (P&I= $1,497). Many of the other figures, such as the loan amount and down payment, can be determined with straightforward arithmetic. Heres how to calculate the less familiar figures that the worksheet requires. Round figures to the nearest dollar amount:

Average monthly principal amortization:

loan amount 30 yr term (# of months) = _________________

Average interest portion of payment:

1. monthly payment 30 yr term (# of months) = _____________ (total P & I)
2. total P& I - principal = ___________ (total interest)
3. total interest 30 yr term (# of months) = ________________ (average interest)

Monthly value of tax deduction:

deductible items 28% tax bracket = __________________

Average monthly appreciation:

Price paid estimated appreciation rate = __________ 12 = ____________

Interest from savings not used for purchase:

$32,500 4% return 12 = _________________