Mortgage and Lending with Mortgage Master



I thought I would share this real life scenario.

I have a friend that is planning to rent a home even though he is more than qualified to buy . However, he wants to "wait out the market"

So, I started to think about the cost of rent, the tax write offs he would be missing, and the lost opportunity for equity growth, and thought, why wait?

I entered his data into a rent versus buy calculator on Yahoo to see what the results would be.

Here are the facts I entered:

 For Renting

Rent is going to be $1600 a month with an additional $300 for rental insurance and an estimated average annual rental increase of 5%.

For Buying

The purchase price of the home he is looking is $300,0000. He plans to put 20% down. His mortgage of $240,000 can be locked in at 6 1/4%. The taxes are $3600, homeowners insurance is $600 and annual maintenance cost are $2000.
I also had to input his tax rate of 25% , a 3.5% estimated inflation rate, and a estimated tax return on savings of 6% before taxes .

The Results Are.........

My friend would save $611,606 in today's dollars by buying instead of renting!

Here is the link to the calculator. Maybe it will help your buyers that are still waiting for the "right time" to buy.

Comments (1)

Larry Wright
nwRealty.Com - Tacoma, WA
Good illustration Bill.  I didn't know Yahoo had that kind of finance tool and will check it out.
Nov 27, 2007 04:12 AM