Question

Rental Costs Buying Costs Annual rent $ 8,130 Annual mortgage payments $ 10,550 (9,950 is interest) Insurance $ 220 Property taxes $ 2,080 Security deposit $ 1,025 Down payment/closing costs $ 5,250 Growth in equity $ 600 Insurance/maintenance $ 1,800 Estimated annual appreciation $ 2,450 Assume an after-tax savings interest rate of 9 percent and a tax rate of 26 percent. Assume this individual has other tax deductions that exceed the standard deduction amount. a. Calculate total rental cost and total buying cost.

Answer 1

Answer:

The total rental cost is $8476 and The total buying cost is $8711.

Explanation:

total rental cost = Annual rent + nsurance + Interest lost on security deposit

                          = 8130 + 220 + 126 + (1400*9%)

                          = $8476

Therefore, The total rental cost is $8476.

total buying costs = Annual mortgage payments  + Property taxes  + Insurance/maintenance + Interest lost on down payment/closing costs - Growth in equity  - Estd. Annual appreciation  - Tax savings on Mortgage interest - Tax savings on property taxes

= 10550  + 2080 + 1800  + (5100*9%)  - 600 - 2450  -  (9950*26%)  - (2080*26%)

= 10550  + 2080 + 1800  + 459  - 600  - 2450  - 2587  - 541

= $8711

Therefore, The total buying cost is $8711.