|
|
|
|
|
|
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 decision between these two
options. This report is based on the original purchase price, fees and taxes payable
at that time. Insurance and tax costs can fluctuate from year to year. 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 expect to 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.
- Association and maintenance fees
- Any association fees you are required
to pay per month with the ownership of this home. Also include any other maintenance
costs you expect to incur with the ownership of this home that you are not paying
while you continue to rent.
- Total for down payment
- Total funds remaining for down payment.
- Mortgage amount
- Total amount of loan.
- Monthly rent payment
- Amount you currently pay for rent per month.
- After-tax investment return
- The rate of return, after taxes, you could
receive if you invested your closing costs and down payment instead of purchasing
a home.
The actual rate of return is largely dependent on the type of investments you select.
The S&P 500 for the ten years ending on December 31st, 2011 had an annual compounded
rate of return of 2.92%, including reinvestment of dividends. From January 1970
through the end of 2011, the average annual compounded rate of return for the S&P
500, including reinvestment of dividends, was approximately 10.01% (source: www.standardandpoors.com).
Since 1970, the highest 12-month return was 61% (June 1982 through June 1983). The
lowest 12-month return was -43% (March 2008 to March 2009). Savings accounts at
a bank may pay as little as 0.25% or less but carry significantly lower risk of
loss of principal balances.
It is important to remember that these scenarios are hypothetical and that future
rates of return can't be predicted with certainty and that investments that pay
higher rates of return are generally 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. It
is not possible to invest directly in an index and the compounded rate of return
noted above does not reflect sales charges and other fees that funds and/or investment
companies may charge.
- Income tax rate
- Your current marginal income tax rate.
- Expected inflation rate
- What you expect for the average long-term inflation
rate. A common measure of inflation in the U.S. is the Consumer Price Index (CPI).
From 1925 through 2011 the CPI has a long-term average of 3.0% annually. Over the
last 31 years highest CPI recorded was 13.5% in 1980. 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.
- Initial 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 $250 (at a tax rate of 25%).
- Initial principal payment
- Total of principal paid per month on your mortgage.
- Net house payment
- Your initial 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.
|
Information and interactive calculators are made available
to you as self-help tools for your independent use and are not intended to provide
investment advice. We can not and do not guarantee their applicability or accuracy
in regards to your individual circumstances. All examples are hypothetical and are
for illustrative purposes. We encourage you to seek personalized advice from qualified
professionals regarding all personal finance issues.
|
|
|