Use Worksheet 5.2. Aurelia Montenegro is currently renting an apartment for $725 per month and paying $275
Question:
Use Worksheet 5.2. Aurelia Montenegro is currently renting an apartment for $725 per month and paying $275 annually for renter’s insurance. She just found a small town-house that she can buy for $185,000. She has enough cash for a $10,000 down payment and $4,000 in closing costs. Her bank is offering 30-year mortgages at 6 percent per year. Aurelia estimated the following costs as a percentage of the home’s price: property taxes, 2.5 percent; homeowner’s insurance, 0.5 percent; and maintenance, 0.7 percent. She is in the 25 percent tax bracket and has an after-tax rate of return on invested funds of 4 percent. Using Worksheet 5.2, calculate the cost of each alternative and recommend the less costly option—rent or buy—for Aurelia.
Step by Step Answer:
Personal Financial Planning
ISBN: 978-1111971632
13th edition
Authors: Lawrence J. Gitman, Michael D. Joehnk, Randy Billingsley