Please use this table provided at the bottom to answer these questions:

Alex is deciding between renting and buying. He is able to save enough for a 20% down payment for a mortgage loan.

• Monthly mortgage payment would be $614.09
• Monthly rent would be $900
• Renter's insurance is $300, and homeowner's insurance would be $800 per year
• Property tax per year would be $1,800, and it would cost about $1,500 to maintain the house per year
• He could earn $750 interest a year on the down payment if he rents, but he would need to pay $187.5 for tax on interest income.
• He would be able to obtain $2,200 principal repaid on the mortgage loan each year
• If he owns the house, he would be able to get tax deductions from mortgage payments. He could save $1,292.27 tax on mortgage interest, and save $450.00 tax on property taxes
• The house value would appreciate by $3,125 a year.

Costs Rent Buy

Cash-flow considerations

Annual rent or mortgage payments

Property and liability insurance

Private mortgage insurance

Real estate taxes

Maintenance

Other housing fees

Less interest earned on funds not used for down payment

Cash-flow cost for the year

Tax and appreciation considerations (using a 25 percent marginal tax rate)

Less principal repaid on the mortgage loan

Plus tax on interest earned on funds not used for down payment

Less tax savings due to deductibility of mortgage interest

Less tax savings due to deductibility of real estate property taxes

Less appreciation on the dwelling

Net cost for the year