Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please help! Which Is Better: To Rent or To Buy? The decision of whether to rent or buy housing is a personal decision that is

please help!
image text in transcribed
image text in transcribed
Which Is Better: To Rent or To Buy? The decision of whether to rent or buy housing is a personal decision that is based on both your lifestyle and your finances. While most financial experts argue that the financial aspect of the decision is important, it is also important not to base your rent-or-buy decision solely on the numbers. Your personal needs and housing market conditions are important. However, it is still necessary to perform the financial analysis. David and his wife are trying to decide whether to rent or to purchase a new townhouse. After looking for several months, they've narrowed their choice down to one particular house, and the builder is willing to lease or sell-depending upon the preference of the buyer. To perform a rent-or-buy analysis, David and his wife have collected the following information: - If they rent, the builder will require monthly rental payments of $1,100 and a security deposit equal to two months of rent, - Since they want to tre protected against the possible loss of their possessions, they will purchase a renters" policy of $200 every six months, while a more comprehensive homeowners' policy will cost 0.5% of the home's value per year. - Money used to fund the house's security deposit could otherwise be invested to eam 2% per year after taxes. Funds expended for a home's down payment and closing costs also incur an opportunity cost. - If the house is purchased, it will cost $247,000 and will require a 20% down payment. The loan will carry an interest rate of 6%, a term of 30 years, and monthly payments of $1,185. The closing costs associated with the house's mortgage will be $3,500. - The property taxes and the maintenance and repair expenses on the house are estimated to be 2% and 2% of the house's total price, respectively. - Your ordinary income is taxed at the rate of 28%, and you il be willing to itemize your tax deductions in the event that you purchase your new home- - Finandal publications report that home values are expected to increase by 30 this year due to inflation. Cornpiete a rent-or-buy analysis worksheet to determine the total cost of renting and the total cost of purchasino David and his wife's prospective house and then recommend their best strategy. To complete the worksheet, enter the appropriate values in their corresponding blanks arid round each value to the nearest whole dollar. f renting Rent the home, as its total cost is less than the total cost of purchasing Purchase the home, as the total cost of purchasing is less than the cost of renting Which Is Better: To Rent or To Buy? The decision of whether to rent or buy housing is a personal decision that is based on both your lifestyle and your finances. While most financial experts argue that the financial aspect of the decision is important, it is also important not to base your rent-or-buy decision solely on the numbers. Your personal needs and housing market conditions are important. However, it is still necessary to perform the financial analysis. David and his wife are trying to decide whether to rent or to purchase a new townhouse. After looking for several months, they've narrowed their choice down to one particular house, and the builder is willing to lease or sell-depending upon the preference of the buyer. To perform a rent-or-buy analysis, David and his wife have collected the following information: - If they rent, the builder will require monthly rental payments of $1,100 and a security deposit equal to two months of rent, - Since they want to tre protected against the possible loss of their possessions, they will purchase a renters" policy of $200 every six months, while a more comprehensive homeowners' policy will cost 0.5% of the home's value per year. - Money used to fund the house's security deposit could otherwise be invested to eam 2% per year after taxes. Funds expended for a home's down payment and closing costs also incur an opportunity cost. - If the house is purchased, it will cost $247,000 and will require a 20% down payment. The loan will carry an interest rate of 6%, a term of 30 years, and monthly payments of $1,185. The closing costs associated with the house's mortgage will be $3,500. - The property taxes and the maintenance and repair expenses on the house are estimated to be 2% and 2% of the house's total price, respectively. - Your ordinary income is taxed at the rate of 28%, and you il be willing to itemize your tax deductions in the event that you purchase your new home- - Finandal publications report that home values are expected to increase by 30 this year due to inflation. Cornpiete a rent-or-buy analysis worksheet to determine the total cost of renting and the total cost of purchasino David and his wife's prospective house and then recommend their best strategy. To complete the worksheet, enter the appropriate values in their corresponding blanks arid round each value to the nearest whole dollar. f renting Rent the home, as its total cost is less than the total cost of purchasing Purchase the home, as the total cost of purchasing is less than the cost of renting

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Forecasting Principles And Practice

Authors: Rob J Hyndman, George Athanasopoulos

1st Edition

0987507109, 978-0987507105

More Books

Students also viewed these Finance questions

Question

What are the current HRM challenges in the textile industry?

Answered: 1 week ago