Rent vs. Buy

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This is based on your home's equity minus a HOME_COMMISION_RATE sales commission paid to brokers or real estate agents when you sell your home. It also assumes your home will appreciate at HOME_APPRECIATION_RATE per year and you have an income tax rate of TAX_RATE. RESULT_MESSAGE_ADVICE

We calculated your breakeven point by examining how long it would take to create enough equity in your home to exceed the value of investing your cash on hand. We also accounted for differences in your monthly rent and house payments. If your rent payment is less than your net house payment, we add that monthly savings to your investment. If your house payment is less than your rent payment we subtract that amount from your investment. You may notice that on the schedule at the bottom of this report the investment value can be reported as negative. This happens if your house payment is significantly lower than your rent payment. It illustrates that if you continue to rent the extra cost of renting would, in effect, use up your cash on hand.

Loan Information

For MONTHLY_TOTAL_PMT and a down payment of TOTAL_FOR_DOWNPAYMENT you can purchase a home with a price of PRICE_OF_HOME. This is for a LENGTH_OF_LOAN year mortgage at INTEREST_RATE in the amount of LOAN_AMOUNT. Total closing costs for this loan are estimated at TOTAL_CLOSING_COSTS.

Your current monthly rent is MONTHLY_RENT. The expected inflation rate of INFLATION_RATE annually was used to estimate future rent and property taxes. The rate of return used for investments was INVESTMENT_RETURN per year.

Your MONTHLY_TOTAL_PMT monthly payment consists of:

Principal and interest MONTHLY_PI

PMI MONTHLY_PMI

Taxes PROPERY_TAX_MONTHLY

Insurance HOME_INSURANCE_MONTHLY

Closing costs of TOTAL_CLOSING_COSTS consists of:

Amount paid of points POINTS_PAID_AMT

Origination fee LOAN_ORIGINATION_AMT

Other closing costs OTHER_CLOSING_COSTS

To avoid PMI payments, a DOWNPAYMENT_20 down payment is required. This equals 20% of your home's purchase price. The total amount of cash required for a 20% down payment plus closing costs would be CLOSING_CLOSING_COSTS_20.

Analysis of Future Payments

**REPEATING GROUP**

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Should you rent or should you buy your home? It takes more than looking at your mortgage payment to answer this question. This calculator helps you weed through the fees, taxes, and monthly payments to help you make a good financial decision. Click the "View Report" button for a detailed look at the results.

Definitions

Price of home

Purchase price of the home you wish to buy.

Cash on hand

Cash you have for the down payment and closing costs.

Interest rate

The current interest rate you can receive on your mortgage.

Term in years

The number of years over which you will repay this loan.

Property tax rate

Your property tax rate. 1% for a $100,000 home equals $1,000 per year in property taxes.

Home insurance rate

Your homeowner's insurance rate. 0.5% for a $100,000 home equals $500 per year for homeowner's insurance.

Loan origination rate

The percentage the lending institution charges for its origination fee. 1% for a $100,000 home equals $1,000.

Points paid

The total number of points paid to reduce the interest rate of your mortgage. Each point costs 1% of your mortgage balance.

Other closing costs

Estimate of all other closing costs for this loan. This should include filing fees, appraiser fees and any other miscellaneous fees paid.

Total closing costs

Total upfront costs to close your loan. This is the sum of the loan origination fee, amount paid for points and other closing costs.

Total for down payment

Total funds remaining for down payment.

Mortgage amount

Total amount of loan.

Investment return

The rate of return you could receive if you invested your closing costs and down payment instead of purchasing a home.

The actual rate of return is largely dependant on the type of investments you select. From January 1970 to December 2003, the average compounded rate of return for the S&P; 500, including reinvestment of dividends, was approximately 11.7% per year. During this period, the highest 12-month return was 64%, and the lowest was -39%. Savings accounts at a bank pay as little as 1% or less. It is important to remember that future rates of return can't be predicted with certainty and that investments that pay higher rates of return are subject to higher risk and volatility. The actual rate of return on investments can vary widely over time, especially for long-term investments. This includes the potential loss of principal on your investment.

Monthly rent payment

Amount you currently pay for rent per month.

Income tax rate

Your current marginal income tax rate.

Expected inflation rate

What you expect for the average long-term inflation rate. This has been calculated by the Consumer Price Index from 1925 to 2002 to be 3.1%. Inflation rate is used to adjust amounts subject to annual increases. These amounts include rent, insurance and tax payments.

Home appreciates at

Annual appreciation you expect in the home you are purchasing.

Future sales commission

The percent of your home's selling price you expect to pay to a broker or real estate agent when you sell your home.

House payment

Total of principal, interest, taxes and insurance (PITI) paid per month for your home. Insurance includes Principal Mortgage Insurance (PMI) and homeowner's insurance.

Principal payment

Total of principal paid per month on your mortgage.

Tax savings

The value of the tax deduction you receive on your mortgage's interest and home's property taxes. For example, if you have $900 in interest and $100 property taxes per month, the value of the tax deduction would be $280. (At a tax rate of 28%).

Net house payment

Your house payment minus the value of the tax deduction and principal payment.

Net home price

Net selling price of your home after subtracting any sales commissions.

Monthly PI

Monthly principal and interest payment.

Monthly PMI

Monthly cost of Private Mortgage Insurance (PMI). For loans secured with less than 20% down, PMI is estimated at 0.5% of your loan balance each year.