worksheet 5.2

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Rent vs. buy home 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 deposit on the apartment. She just found a small townhouse she can buy for $280,000. She has enough cash for a $10,000 down payment and $4,100 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, 2.5 percent homeowner's 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 Kayla Assume that Kayla uses the standard deduction of $24,000. Round the answers to the nearest do la Cost of renting: 5 Cost of buying: 5 Kayla should the home A COST OF RENTING Annual rental costs 12 monthly rental rute of 2. Peter's Insurance 1. Opportunity cant el security deposit Maharaningsrate Toul contot renting Cine A.2.1.2.13 A. COST OF BUYING mont 5 7 Annamon Dayments Terms 12 monthly mong payment of 5 2 Property Notice of homes Homeowner's insurance of price of home 0 1 2 3 4 5 6 27 28 29 an 4. Maintenance No price of home 5. Ahora sonterest on down payment and doing costs after a rate ofretum 5. After-tax cost of interest on down payment and closing costs 5 %after-tax rate of return 6. Total costs (sum of lines 8.1 through 8.5) $ 7. Principal reduction in loan balance (see note below) $ x tax rate of & Tax savings due to interest deductions Interest portion of mortgage payments 9. Tux savings due to property tax deductions (line 8.2 x tax rate of %) 10. Total deductions (sum of lines 7 through 8.9) 5 11. Annual after-tax cost of home ownership (line 8.6 - Iine 8.10) 12. Estimated annual appreciation in value of home % of price of home) Total cost of buying fine 8. 11 - Tine 8.12) Rent vs. buy home 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 deposit on the apartment. She just found a small townhouse she can buy for $280,000. She has enough cash for a $10,000 down payment and $4,100 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, 2.5 percent homeowner's 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 Kayla Assume that Kayla uses the standard deduction of $24,000. Round the answers to the nearest do la Cost of renting: 5 Cost of buying: 5 Kayla should the home A COST OF RENTING Annual rental costs 12 monthly rental rute of 2. Peter's Insurance 1. Opportunity cant el security deposit Maharaningsrate Toul contot renting Cine A.2.1.2.13 A. COST OF BUYING mont 5 7 Annamon Dayments Terms 12 monthly mong payment of 5 2 Property Notice of homes Homeowner's insurance of price of home 0 1 2 3 4 5 6 27 28 29 an 4. Maintenance No price of home 5. Ahora sonterest on down payment and doing costs after a rate ofretum 5. After-tax cost of interest on down payment and closing costs 5 %after-tax rate of return 6. Total costs (sum of lines 8.1 through 8.5) $ 7. Principal reduction in loan balance (see note below) $ x tax rate of & Tax savings due to interest deductions Interest portion of mortgage payments 9. Tux savings due to property tax deductions (line 8.2 x tax rate of %) 10. Total deductions (sum of lines 7 through 8.9) 5 11. Annual after-tax cost of home ownership (line 8.6 - Iine 8.10) 12. Estimated annual appreciation in value of home % of price of home) Total cost of buying fine 8. 11 - Tine 8.12)