Renting vs. Buying
Why NOW is a GREAT time to BUY because of the interest rate.
Current Cap-Fed Rate for 30 year fixed is 4.75% (Historically Low!)
(Rate as of Friday, July 9th 2010)
For example sake, let’s assume a $90,000 home purchase.
5% down payment ($4,500 dollars.)
Loan amount: $85,500
Taxes at 1.25% of home value
PMI: 0.5% (mortgage insurance that protects the lender. This is eliminated if 20% down payment or when equity reaches 20% of home value)
Homeowners insurance is NOT included in these calculations.
The following dramatically illustrates why NOW is a great time to buy as opposed to renting or waiting to purchase. This is assuming a 30 year fixed rate loan at the assumed rate. Again, current is 4.75% (as of Friday, July 9th 2010)
If your mortgage rate is more than 2.5% above the current of 4.75%, you should consider refinancing at a lower rate.
These figures represent the life of a 30 year loan based upon the rate below.
Rate: Payment: Total Paid: Total Interest paid: Total tax paid: PMI: “Rent:”
4.75% $570.70 $205,450.55 $82,566.80 $33,750 $3,633.75 $229.30
5.5% $610.15 $219,652.95 $96,484.20 $33,750 $3,918.75 $189.85
6.0% $637.30 $229,429.15 $106,011.03 $33,750 $4,168.13 $162.20
6.5% $665.11 $239,438.04 $115,806.16 $33,750 $4,381.88 $134.89
7.0% $693.52 $249,662.61 $125,821.98 $33,750 $4,595.63 $106.48
“Rent” for positive cash flow is based upon being able to rent the property for $800.00 per month. This is an assumption but is based upon reasonable rental rates for a home of this value.
If you purchased and decided to move up after 2 years, those figures represent what you could expect to get per month in positive cash flow if you were the landlord.