Use Worksheet 5.2. Kayla Thompson is married and currently rents an apartment for $700 per month and paying $375 annually for renter's insurance. Her landlord required a $1,000 security depout on the apartment. She just found a small townhouse she can buy for $285,000. She has enough cash for a $10,000 down payment and 54,100 in closing costs. Her bank is offering 30-year mortgages at a 6 percent annual rate. Kayla estimated the following costs as a percentage of the home's price property taxes, 25 percent homeowners Insurance, 0.5 percent, and maintenance, 0.7 percent. She is in the 25 percent tax bracket, has an after tax rate of return on invested funds of 4 percent, and expects the townhouse to appreciate 2 percent per year. Using Worksheet 5.2, calculate the cost of each alternative and recommend the least costly option-rent or buy for Kayfa Assume that Kayta uses the standard deduction of $24,000. Round the answers to the nearest dalla Cost of renting: 5 Cost of buying Kayle should the home RENT-OR-BUY ANALYSIS A COST OF RENTING 1. Annual rental costs (12 monthly rental rate of 2 Renters insurance after-tax saving rate mouth, 3. Opportunity cost of security deposit Total cost of renting (line 1.1+ line A.2 + line 13) B. COST OF BUYING 1. Annual mortgage payments (Tems (12 monthly mortgage payment of 2. Property taxes of price of home) 3. Hoewner'in of price of home) 4. Maintenance % of price of home) Atter-tax cost of interest on down payment and closing costs "ather tax rate of return) 6. Total costs (sum of lines 8.1 through :) Less Oxtar rate or !!.. 7. Principal reduction in loan balance see note below) * Tax savings due to interest deductions Interest portion of moetgage payments Tax savings due to property tax deductions (line 82 tax rate of 10. Total deductions (sum of lines 8,7 through 8.9 11. Alfer cost of home ownership (line 1.6-line B.10) 12. Estimated and appreciation in value of home % of price of home) Total cost of buying cine 1.11 - line 1:12) Find monthly mortgage payments wing a calculator or a spreadibed An easy way to approximate the portion of the annual loan payment that goes to deres line Box) is to multiply the rest me by the ve of the loan to find the principal reduction in the loan tale (line 8. 7simply subtract the amount that presto interest from total anal money. Tex-shelter Use Worksheet 5.2. Kayla Thompson is married and currently rents an apartment for $700 per month and paying $375 annually for renter's insurance. Her landlord required a $1,000 security depout on the apartment. She just found a small townhouse she can buy for $285,000. She has enough cash for a $10,000 down payment and 54,100 in closing costs. Her bank is offering 30-year mortgages at a 6 percent annual rate. Kayla estimated the following costs as a percentage of the home's price property taxes, 25 percent homeowners Insurance, 0.5 percent, and maintenance, 0.7 percent. She is in the 25 percent tax bracket, has an after tax rate of return on invested funds of 4 percent, and expects the townhouse to appreciate 2 percent per year. Using Worksheet 5.2, calculate the cost of each alternative and recommend the least costly option-rent or buy for Kayfa Assume that Kayta uses the standard deduction of $24,000. Round the answers to the nearest dalla Cost of renting: 5 Cost of buying Kayle should the home RENT-OR-BUY ANALYSIS A COST OF RENTING 1. Annual rental costs (12 monthly rental rate of 2 Renters insurance after-tax saving rate mouth, 3. Opportunity cost of security deposit Total cost of renting (line 1.1+ line A.2 + line 13) B. COST OF BUYING 1. Annual mortgage payments (Tems (12 monthly mortgage payment of 2. Property taxes of price of home) 3. Hoewner'in of price of home) 4. Maintenance % of price of home) Atter-tax cost of interest on down payment and closing costs "ather tax rate of return) 6. Total costs (sum of lines 8.1 through :) Less Oxtar rate or !!.. 7. Principal reduction in loan balance see note below) * Tax savings due to interest deductions Interest portion of moetgage payments Tax savings due to property tax deductions (line 82 tax rate of 10. Total deductions (sum of lines 8,7 through 8.9 11. Alfer cost of home ownership (line 1.6-line B.10) 12. Estimated and appreciation in value of home % of price of home) Total cost of buying cine 1.11 - line 1:12) Find monthly mortgage payments wing a calculator or a spreadibed An easy way to approximate the portion of the annual loan payment that goes to deres line Box) is to multiply the rest me by the ve of the loan to find the principal reduction in the loan tale (line 8. 7simply subtract the amount that presto interest from total anal money. Tex-shelter
