Question #2: Rent versus Buy I am calculating the costs and benefits of buying versus renting. 1. Renting option: I am paying $1,850 rent each month and I plan to stay in this area for 5 years 2. Buying option: a. To purchase a home: annual interest rate- 4.15%, 0 down payment, closing cost including transaction tax buyer pays 4.5% b. To maintain a home: annual property tax -85 cents for every $100 home value, annual maintenance 0.5% of the home value. C. To sell a home: realtor fee seller pays 5%, transaction tax seller pays 3% Questions: a. To be breakeven in 5 years between renting and buying, what is the maximum value of the property I can purchase? b. What is m y monthly mortgage payment c. What is my monthly housing expenditure, including mortgage, tax, and maintenance? d. How much cash do I need for closing? e. Using 4.15%, what much is my monthly opportunity f. What is my monthly cash flow between renting and g. After 5 years, what is my outstanding mortgage loan? cost for the cash for closing? buying? h. Assuming the selling price is the same with the purchasing price (i.e., no appreciation), how much is my net proceed? How much is my total gain/loss after 5 years (remember that I had to pay closing cost when I purchased the home)? Question #2: Rent versus Buy I am calculating the costs and benefits of buying versus renting. 1. Renting option: I am paying $1,850 rent each month and I plan to stay in this area for 5 years 2. Buying option: a. To purchase a home: annual interest rate- 4.15%, 0 down payment, closing cost including transaction tax buyer pays 4.5% b. To maintain a home: annual property tax -85 cents for every $100 home value, annual maintenance 0.5% of the home value. C. To sell a home: realtor fee seller pays 5%, transaction tax seller pays 3% Questions: a. To be breakeven in 5 years between renting and buying, what is the maximum value of the property I can purchase? b. What is m y monthly mortgage payment c. What is my monthly housing expenditure, including mortgage, tax, and maintenance? d. How much cash do I need for closing? e. Using 4.15%, what much is my monthly opportunity f. What is my monthly cash flow between renting and g. After 5 years, what is my outstanding mortgage loan? cost for the cash for closing? buying? h. Assuming the selling price is the same with the purchasing price (i.e., no appreciation), how much is my net proceed? How much is my total gain/loss after 5 years (remember that I had to pay closing cost when I purchased the home)
