Buying a Home Vs. Renting

Group 1: Elizabeth Anderson, Natalie Christner, Val Denter, Jason Holmes, and Stephanie Stevens

Project Part 3 Math 1050-040-F12

IntroductionFor Math 1050 we were required to complete a cost and benefit analysis of either buying or

renting a home. We each had the opportunity to research a career and the accompanying wage. We then had to find a home that we would like to live in and figure out if we could afford the

house based on our predicted future salaries.

Person Career Salary House Price House Location

Stephanie Elementary Teacher

$49,931 $199,000 West Jordan, Utah

Jason Astronomer $50,000 $197,000 Tucson, Arizona

Elizabeth Elementary Teacher

$31,200 $120,000 Sandy, Utah

Natalie Biochemist $39,000 $249,999 Riverton, Utah

Val Electrical Engineer

$50,000 $139,000 Port Orford, Oregon

Purpose

The purpose of this presentation is to explore the pros and cons of renting or buying a home as well as the pros and cons of a 15-year loan to a 30-year loan. We will also go through the math used to calculate each of these things based on the type of home each person could afford.

Renting vs. Buying

There are advantages and disadvantages of buying a home or renting an apartment or house. Of course, this all depends on your lifestyle or what you

can afford.

Disadvantages Of BuyingMaintenance- If the furnace goes out or garbage disposal breaks ect. it's your responsibility.

Property Tax- Taxes can increase and you must pay them.

Depreciation- Your home can lose it's value, This depends upon the economy.

Insurance- It is mandatory that you pay homeowners insurance through the duration of the loan.

Advantages of BuyingTax Benefits- Home owners can use mortgage interest payments and property tax as a deduction.

Equity- If your home maintains its value, you can build equity as you pay down your mortgage.

Freedom To Alter Purpose And Appearance- As a homeowner you can knock down a wall or make aesthetic changes as you wish.

Stable House Payment- If you choose a fixed rate mortgage, your principal and interest payment amount will never increase.

Noise- Nobody jumping up and down on your ceiling.

Make money- A real estate investment can be used to make more money. This is accomplished by purchasing a home and selling it when it's value is worth more than the amount is owed.

Advantages Of RentingNo Maintenance- Most rentals will take care of any breakdowns or mishaps you my have.

Amenities- Your place of rental may have swimming pools, basketball courts, playgrounds and exercise equipment all in the same complex for your enjoyment.

Easy To Move- You don't have to worry about selling a house. If you have to relocate a lot because of your career or being pursued by the mob, you can do so after the lease is paid.

Disadvantages Of RentingRent- your rent can increase without notice making it less affordable.

Pets- you may not be able to have that lovable Pit Bull or 200 pound Great Dane.

Decor- You can't paint or remodel without permission.

No Tax Benefits- renters can't deduct housing expenses.

No Equity

Cleaning Deposits- Most renters have to pay a cleaning deposit that they may not get back when they decide to move.

Mortgage Options

30 Year Pros 15 Year Pros

Lower interest rate than 15 Year Pay less interest over the course of the loan

Lower monthly payment than 15 Year leaving more disposable income

With your lower payment, you have the ability to put more money toward principal each month, essentially paying it off sooner

Build your equity faster than a 30 year

Mortgage Rates and Payment Info• All group members were asked to calculate a monthly payment, based on

their research.

• Both a 15 year fixed payment and a 30 year fixed payment were calculated.

• The Compound Interest Formula was used in figuring the monthly payment:

• Results were then compared to an online Amortization Schedule to determine at what part of the loan timeline the homeowner was paying more in principal than interest.

Mortgage Rates and Payment InfoJason

30 Year Fixed Rate

15 Year Fixed Rate

• House Price $197,000.00• Down Payment $19,700.00• Mortgage Amount $177,300.00• Interest Rate 3.44%• Monthly Payment $790.23

• House Price $197,000.00• Down Payment $19,700.00• Mortgage Amount $177,300.00• Interest Rate 2.84%• Monthly Payment $1210.80

Mortgage Rates and Payment InfoNatalie

30 Year Fixed Rate

15 Year Fixed Rate

• House Price $249,999.00• Down Payment $24,999.90• Mortgage Amount $224,999.10• Interest Rate 3.3%• Monthly Payment $985.40

985.40

• House Price $249,999.00• Down Payment $24,999.90• Mortgage Amount $224,999.10• Interest Rate 2.689%• Monthly Payment $1520.37

1520.37

Mortgage Rates and Payment InfoVal

30 Year Fixed Rate

15 Year Fixed Rate

• House Price $139,000.00• Down Payment $13,900.00• Mortgage Amount $125,100.00• Interest Rate 3.625%• Monthly Payment $570.52

570.52

• House Price $139,000.00• Down Payment $13,900.00• Mortgage Amount $125,100.00• Interest Rate 2.875%• Monthly Payment $856.42

856.42

Mortgage Rates and Payment InfoStephanie

30 Year Fixed Rate

15 Year Fixed Rate

• House Price $199,000.00• Down Payment $19,900• Mortgage Amount $179,100.00• Interest Rate 3.52%• Monthly Payment $806.24

806.24

• House Price $199,000.00• Down Payment $19,900• Mortgage Amount $179,100.00• Interest Rate 2.84%• Monthly Payment $1223.10

1223.10

Mortgage Rates and Payment InfoElizabeth

30 Year Fixed Rate

15 Year Fixed Rate

• House Price $120,000.00• Down Payment $6000.00• Mortgage Amount $114,000.00• Interest Rate 3.57%• Monthly Payment $516.38

516.38

• House Price $120,000.00• Down Payment $6000.00• Mortgage Amount $114,000.00• Interest Rate 3.002%• Monthly Payment $787.37

787.37

Amortization Schedule

•36% to 38% of total money paid for each home was paid to interest during the term of the 30 year loan.

•It took 9 to 11 years to have more of the payment put toward principle than interest during the term of the 30 year loan.

•17% to 19% of total money paid for each home was paid to interest during the term of the 15 year loan.

•More principle than interest was paid on the 1st payment of the 15 year loan.

•Paying an additional $100 each month during the 15 year loan only resulted in a savings of approximately $4000 to $5000.

Conclusion

• Buying or renting a home is dependant upon your income and lifestyle.

• Buying a home gives you freedom to do what you will with it, but there are many costs associated with ownership.

• When buying a home, one must consider if a cheaper payment (30 year mortgage) is more important than paying less interest (15 year mortgage.

• Depending on the economy, renting is not always cheaper than buying a home.

CreditsJason - Kept us all coordinated and Mortgage Options

Val – Buying vs. Renting

Stephanie – Introduction

Elizabeth – Purpose and Conclusion

Natalie – Slide Animations/Transitions, Backgrounds, and Credits