Problem - Based on the following data, would you recommend buying or renting?
Rental Costs Buying Costs Annual rent$7,980 Annual mortgage payments$10,700 (9,875 is interest) Insurance$205 Property taxes$2,020 Security deposit$1,250 Down payment/closing costs$5,400 Growth in equity$825 Insurance/maintenance$1,650 Estimated annual appreciation$2,300
Assume an after-tax savings interest rate of 6 percent and a tax rate of 28 percent. Assume this individual has other tax deductions that exceed the standard deduction amount.
a. Calculate total rental cost and total buying cost.
b. Would you recommend buying or renting?