October 29th, 2013 3:17 PM by Dana Bain
If you stay in yourhome for 6 years,buying is better.
It will cost you$10,460 lessthan renting,an average savings of$1,743 each year.
*Property taxes, the interest part of the mortgage payment, and in some cases, a portion of the common charges, are tax deductible. The resulting tax savings is accounted for in each item’s totals.
The calculator keeps a running tally of the most common expenses of owning and renting. It also takes into account something known as lost opportunity costs — for example, the return you could have earned by investing your money instead of spending it on a down payment. The calculator assumes that the profit you would have made in your investments would be taxed as long-term capital gains and adjusts the bottom line accordingly. The calculator tabulates lost opportunity costs for all parts of the buying and renting scenarios.
Purchase costs are the costs you incur when you go to the closing for the home you are purchasing. This includes the down payment and typical closing costs.
Yearly costs are recurring monthly or yearly expenses. These include mortgage payments, condo fees (or other community living fees), renovation costs, maintenance costs, property taxes and homeowner’s insurance. Property taxes, the interest part of the mortgage payment, and in some cases, a portion of the common charges, are tax deductible. The resulting tax savings is accounted for in each item’s totals. The mortgage payment amount increases each year for the term of the loan because the tax credit shrinks each year as the interest portion of the payments becomes smaller.
Lost opportunity costs are tracked for the initial purchase costs and for the yearly costs. The former will give you an idea of how much you could have made if you had invested the down payment instead of buying your home.
Selling costs are the costs you incur when you go to the closing for the home you are selling. This includes the broker’s commission and other fees, as well as the remaining principal balance that you pay to your mortgage bank. “Proceeds from home sale” is the money that you receive from the person who is buying your home. This amount is equal to the value of the home that year and is shown as a negative number since it is not something that you spend money on, but rather, it is money you receive.
If your cumulative buying total is negative, it actually means you have done very well: you made enough of a profit that it not only covered the cost of your home, but also all of your yearly operating expenses.
Initial costs are the rent security deposit and, if applicable, the broker’s fee.
Yearly costs are the monthly rent and the cost of renter’s insurance.
Lost opportunity costs are calculated each year for both your initial costs and your yearly costs.
Leaving your rental is equal to the rent security deposit, typically returned to a renter at the end of a lease.