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Purchase or Rent Analysis: Inputs Present Worth Analysis

This document compares the costs of renting versus purchasing a home over 5 years. It provides inputs like purchase price, down payment, interest rates, monthly costs, and future sale price. It then calculates the monthly mortgage payment and remaining balance at sale. A present worth analysis is conducted to determine the total costs of renting versus owning when discounted to current dollars. The analysis finds the total cost of renting is $60,654.92 while the total cost of purchasing is $59,557.18, resulting in a $1,097.75 present worth advantage to purchasing the home.

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Calvin Windoro
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76 views1 page

Purchase or Rent Analysis: Inputs Present Worth Analysis

This document compares the costs of renting versus purchasing a home over 5 years. It provides inputs like purchase price, down payment, interest rates, monthly costs, and future sale price. It then calculates the monthly mortgage payment and remaining balance at sale. A present worth analysis is conducted to determine the total costs of renting versus owning when discounted to current dollars. The analysis finds the total cost of renting is $60,654.92 while the total cost of purchasing is $59,557.18, resulting in a $1,097.75 present worth advantage to purchasing the home.

Uploaded by

Calvin Windoro
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLS, PDF, TXT or read online on Scribd
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Purchase or Rent Analysis


Inputs
Length of ownership/renting (years)
Personal interest rate (percent)

5
10.0%

Renting
Deposit (returned at departure)
Monthly payments (first year)
Monthly rent change each year
Renters insurance (monthly)

$1,200
$1,200
$25
$35

Purchase
Application/closing fees
Purchase price
Down payment percentage
Loan interest rate (percent)
Loan length (years)
Monthly insurance and tax
Monthly maintenance
Future selling price
Sales commission/fees (percent)

$2,000
$150,000
20.0%
7.0%
30
$200
$50
$160,000
7.0%

Calculations
Monthly mortgage payment
Mortgage balance at time of sale

$798.36
$112,957.91

Present Worth Analysis


Note: cash inflows are negative values; cash outflows are positive values

Renting
Deposit
Monthly payment (base)
Monthly rent change each year
Renters insurance
Renting total cost

Present Worth
$470.65
$56,478.44
$2,058.54
$1,647.29
$60,654.92

Purchase
Application/closing fees
Monthly mortgage payments
Down payment

Present Worth
$2,000.00
$37,575.25
$30,000.00

Monthly insurance and tax


Monthly maintenance
Equity in house
Sales commission/fees
Owning total cost
Present worth advantage:
Purchase Home

$9,413.07
$2,353.27
($28,591.65)
$6,807.23
$59,557.18

$1,097.75

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