Continuing Case $41.$ Renting or Buying Housing

Five years have passed and Jamie Lee, $34,$ is considering taking the plunge$--$not only is she engaged to be married, but she is also deciding on whether to purchase a new home.

Jamie Lee$$s cupcake caf$$ is a success! It has been open for over a year now and has earned itself rave reviews in the local press and from its regular customers who just cannot get enough of her delicious varieties of cupcakes. One such customer, who stopped by on a whim in the caf$$s first week of business, is Ross. After a whirlwind courtship, Ross, a self$-$employed web designer, proposed, and Jamie Lee agreed to be his wife.

The bungalow that Jamie Lee has been renting for the past five years is too small for the soon$-$to$-$be newlyweds, so Jamie Lee and Ross have found a brand new three$-$bedroom, $2(1)/(2)$ bath home in a quiet neighborhood for $$275,000.$

Their neighborhood$$s homeowner$$s association dues would be $$348\mathrm{.}00$ a year. After paying a year$$s worth of house payments, their equity will be $$5,200.$ Based on Jamie Lee and Ross$$ income, they fall into a $25\%$ tax rate bracket. Use this payment information along with the information below to compare the costs of renting and buying a house.

Rent payment for a house $($monthly$)$ $$650$

Renter's security deposit $$300$

Renter's insurance $($yearly$)$ $$80$

Savings account interest rate $1\mathrm{.}05\%$

Mortgage payment $$1,271\mathrm{.}93$

National average property tax rate $1\mathrm{.}17\%$

Homeowner's insurance payment $($monthly$)$ $$29$

Maintenance and repair $(\%$ of home value$)1\%$

Interest lost on down payment$/$closing costs $$750$

Mortgage interest paid in first year $$12,500$

Estimated annual appreciation $$2,100$