Question
Is it more economical to purchase or rent a home? Evaluate the economics of renting versus buying a ZMK 3,305,238 home and living in it
Is it more economical to purchase or rent a home? Evaluate the economics of renting versus buying a ZMK 3,305,238 home and living in it for five years. Use the data below in your analysis. Rental Option: Rent is ZMK 26,441 per month for the first year. The monthly rental fee will increase by ZMK 550 for each subsequent year of renting. There is also a ZMK 26,441 deposit payable when the lease is signed and refundable when the house is left in good condition. Renters insurance is ZMK 771 per month. Purchase Option: A ZMK 661,045 down payment is made, so ZMK 2,644,193 will be financed with a 30-year mortgage having a 7% annual interest rate. Additional closing costs of ZMK 44,070 are paid at the time of purchase. Property taxes and homeowners insurance total ZMK 4,407 per month, and maintenance is expected to average ZMK 1,102 per month. The resale value of the home after five years is anticipated to be ZMK 3,525,591. The commission paid to the realtor at the time of the sale is expected to be 7% of the selling price. If your personal interest rate is 10% per year (compounded monthly), is it more economical to rent or purchase this home? Examine the sensitivity of the decision to changes in the resale value of the home, the mortgage rate, and the length of ownership (use spreadsheet-excel)
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