Question

Kayla Thompson is married and currently rents an apartment for $575 per month and paying $200 annually for renter's insurance. Her landlord required a $1,000 security deposit on the apartment. She just found a small townhouse she can buy for $285,000. She has enough cash for a $10,000 down payment and $4,200 in closing costs. Her bank is offering 30-year mortgages at a 6 percent annual rate. Kayla 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, has an after-tax rate of return on invested funds of 4 percent, and expects the townhouse to appreciate 2 percent per year. Using Worksheet 5.2, calculate the cost of each alternative and recommend the least costly option - rent or buy - for Kayla. Assume that Kayla uses the standard deduction of $24,000. Round the answers to the nearest dollar.

Cost of renting: $ _______

Cost of buying: $ _______

Kayla should _______ the home. (Select: Buy/Rent)

Answer 1

Considering the closing and other costs, it is to be appreciated that it costs 575 for a month and 12*575 is 6900 plus 200 dollors ayear for insurance, together costs 7100 dollors a month.

When comparing to the growing costs and other factors and taxes into consideration, it is much better to have a house on thier on board.

1.cost of renting for an year - 7100 dollors

2.cost of buying house - 317000 dollors

Considering all this, it is advisable for him to go take a loan and buy a house rather than renting for all his life.