Loan Officer Assistance:
|Loan Programs, Rates & Fees||Your Application||Your Property|
|Closing & Beyond||Calculators||Glossary|
|Rent vs. Buy|
|Should you rent or should you buy your home? It takes more than looking at your mortgage payment to answer this question. This calculator helps you work through the fees, taxes, and monthly payments to help you make a good financial decision.
- Price of home
- Purchase price of the home you wish to buy.
- Interest rate
- The interest rate you expect to receive on your mortgage.
- Term in years
- The number of years over which you will repay this loan. The most common mortgage terms are 15 years and 30 years.
- Property tax rate
- Your property tax rate. 1% for a $100,000 home equals $1,000 per year in property taxes.
- Home insurance rate
- Your homeowner's insurance rate. 0.5% for a $100,000 home equals $500 per year for homeowner's insurance.
- Assoc. & maintenance fees
- Any association fees you are required to pay per month with the ownership of this home. Also include any other maintenance costs you expect to incur with the ownership of this home that you are not paying while you continue to rent.
- Cash on hand
- Cash you have for the down payment and closing costs.
- Loan origination rate
- The percentage the lending institution charges for its origination fee. 1% for a $100,000 home equals $1,000.
- Points paid
- This is the number of points paid to the lender to reduce the interest rate on the mortgage. Each point costs 1% of the new loan amount.
- Other closing costs
- Estimate of all other closing costs for this loan. This should include filing fees, appraiser fees and any other miscellaneous fees paid.
- Total for down payment
- Total funds remaining for down payment.
- Monthly rent payment
- Amount you currently pay for rent per month.
- After-tax investment return
The rate of return, after taxes, you could receive if you invested your closing costs and down payment instead of purchasing a home.
The actual rate of return is largely dependent on the types of investments you select. The Standard & Poor's 500 (S&P 500©) index for the 10 years ending Dec. 31st, 2012 had an annual compounded rate of return of 7.1%, including reinvestment of dividends. From January 1970 through the end of 2012, the average annual compounded rate of return for the S&P 500, including reinvestment of dividends, was approximately 10.1% (source: www.standardandpoors.com). Since 1970, the highest 12-month return was 61% (June 1982 through June 1983). The lowest 12-month return was -43% (March 2008 to March 2009). Savings accounts at a financial institution may pay as little as 0.25% or less but carry significantly lower risk of loss of principal balances.
It is important to remember that these scenarios are hypothetical and that future rates of return can't be predicted with certainty and that investments that pay higher rates of return are generally subject to higher risk and volatility. The actual rate of return on investments can vary widely over time, especially for long-term investments. This includes the potential loss of principal on your investment. It is not possible to invest directly in an index and the compounded rate of return noted above does not reflect sales charges and other fees that separate account investment funds and/or investment companies may charge.
- Income tax rate
Your current marginal income tax rate. Use the table below to assist you in estimating your federal 2014 tax rate.
Filing Status and Income Tax Rates 2014* Tax rate Married Filing Jointly or Qualified Widow(er) Single Head of household Married filing separately 10% $0 - $18,150 $0 - $9,075 $0 - $12,950 $0 - $9,075 15% $18,150 - $73,800 $9,075 - $36,900 $12,950 - $49,400 $9,075 - $36,900 25% $73,800 - $148,850 $36,900 - $89,350 $49,400 - $127,550 $36,900 - $74,425 28% $148,850 - $226,850 $89,350 - $186,350 $127,550 - $206,600 $74,425 - $113,425 33% $226,850 - $405,100 $186,350 - $405,100 $206,600 - $405,100 $113,425 - $202,550 35% $405,100 - $457,600 $405,100 - $406,750 $405,100 - $432,200 $202,550 - $228,800 39.6% over $457,600 over $406,750 over $432,200 over $228,800 *Caution: Do not use these tax rate schedules to figure 2013 taxes. Use only to figure 2014 estimates. Source: 2014 preliminary tax brackets subject to correction http://www.irs.gov
- Expected inflation rate
- This is what you expect for the average long-term inflation rate. A common measure of inflation in the US is the Consumer Price Index (CPI). From 1925 through 2012, the CPI has a long-term average of 3.0% annually. Over the last 40 years, the highest CPI recorded was 13.5% in 1980. Inflation rate is used to adjust amounts subject to annual increases. These amounts include rent, insurance and tax payments.
- Home appreciates at
- Annual appreciation you expect in the home you are purchasing.
- Future sales commission
- The percent of your home's selling price you expect to pay to a broker or real estate agent when you sell your home.
- House payment
- Total of principal, interest, taxes and insurance (PITI) and maintenance paid per month for your home. Insurance includes Principal Mortgage Insurance (PMI) and homeowner's insurance.
- Initial tax savings
- The value of the tax deduction you receive on your mortgage's interest and home's property taxes. For example, if you have $900 in interest and $100 property taxes per month, the value of the tax deduction would be $250 (at a tax rate of 25%).
- Initial principal payment
- Total of principal paid per month on your mortgage.
- Net house payment
- Your initial house payment minus the value of the tax deduction and principal payment.
- Net home price
- Net selling price of your home after subtracting any sales commissions.
- Monthly payment (PI)
- Monthly principal and interest payment. This does not include escrows for items such as homeowner's insurance and real estate taxes.
- Monthly PMI
- Monthly cost of Private Mortgage Insurance (PMI). For loans secured with less than 20% down, PMI is estimated at 0.5% of your loan balance each year.