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Patricia has been renting a two bedroom house for years. She pays $1000 per month in rent for the apartment and $400 per year in
- Patricia has been renting a two bedroom house for years. She pays $1000 per month in rent for the apartment and $400 per year in property and liability insurance. The owner of the house wants to sell it, and Patricia is considering making an offer. The owner wants $180,000 for the property, but Patricia thinks she could get the house for $170,000 and use her $20,000 in 3% CDs that are ready to mature for the down payment. Patricia has talked to her bank and could get a 4.5% mortgage loan for 30 years to finance the remainder of the purchase price. Property taxes on the house are $2000 per year. Insurance would need to be upgraded to $900 a year and Patricia would incur about $1000 in costs the first year for maintenance. Property values are increasing at about 2% per year in the neighborhood. Patricia is in the 25% marginal tax bracket.
- calculate the monthly mortgage payment for the mortgage loan.
- whether Patricia should continue renting or would she be better off buying the home. For any numbers not included in the scenario but are on the worksheet just leave blank.
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