Based on the following data, would you recommend buying or renting?
Rental Costs
Buying Costs
Annual rent, $7,380
Annual mortgage payments, $9,800 ($9,575 is interest)
Insurance, $145
Property taxes, $1,780
Security deposit, $650
Down payment/closing costs, $4,500
Insurance/maintenance, $1,050
Growth in equity, $225
Estimated annual appreciation, $1,700
Assume an after-tax savings interest rate of 6 percent and a tax rate of 28 percent.
$7,380
Rent
$9,800
Mortgage payments
145
Insurance
2,830
Taxes, insurance, maintenance
39
Interest lost on security deposit
270
Interest lost on down payment,
closing costs
-225
Growth in equity
-1,700
Annual appreciation
-2,681
Tax savings for mortgage interest
-498
Tax savings for property taxes
$7,564
Total rental costs
$7,796
Total buying costs
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