RENT-OR-BUY ANALYSIS

A. COST OF RENTING
1. Annual rental costs
Monthly rental cost $ 725
Period 12
2. Renter's insurance
3. Opportunity cost of security deposit
4. Total cost of renting (1+2+3)

B. COST OF BUYING
1. Annual mortgage payments
Loan (Cost of house - down payment) $ 175,000.00
Period 360.00
Interest rate 6%
Monthly mortgage payment $1,049.21
2. Property taxes
(2.5% of house price)
3. Homeowner insurance
(0.5% of house price)
4. Maintenance
(0.7% of house price)
5. After-tax cost of interest on down payment and closing cost
Down payment $ 10,000.00
Closing cost $ 4,000.00
After-tax rate of return 4%
6. Total costs (1+2+3+4+5)

LESS:
7. Principal reduction in loan balance
Annual loan payment $ 10,500.00
Interest rate 6%
Loan $ 175,000.00
Annual mortgage payments $ 12,590.56
8. Tax savings due to interest deductions
Annual loan payment $ 10,500.00
Tax rate 25%
9. Tax savings due to property tax deductions
(Property taxes x tax rate)
10. Total deductions (7+8+9)
11. Annual after-tax cost of homeownership
(A6 - B10)
12. Estimated annual appreciation in value of home

TOTAL COST OF BUYING (11-12)

$ 8,700

$ 275
$ -
$ 8,975

$ 12,590.56

$ 4,625.00

$ 925.00

$ 1,295.00

$ 560.00

$ 19,995.56

$ 2,090.56

$ 2,625.00

$ 1,156.25

$ 5,871.81
$ 14,123.75

$ 14,123.75
 HOME AFFORDABILITY ANALYSIS

Name: Robin and Sidney Putnam

Item Description
1 Amount of annual income
2 Monthly income
(Item 1/12)
3 Lender's affordability ratio
4 Maximum monthly mortgage payments (PITI)
5 Estimated monthly prop tax and homeowner's insurance payment
6 Maximum monthly loan payment
(Item 4 - Item 5)
7 Approximate average interest on loan
8 Planned loan maturity (years)
9 Monthly mortgage payment per $10,000
10 Maximum loan based on monthly income
($10,000 x Item 6 / Item 9)
11 Funds available for making a down payment and paying closing costs
12 Funds available for making a down payment
(Item 11 x 0.67)
13 Maximum purchase price based on available monthly income
(Item 10+Item 12)
14 Minimum acceptable down payment
15 Maximum purchase price based on down payment
(Item 12 / Item 14)
16 Maximum home purchase price
(Lower of item 13 and Item 15)
S

*Calculating monthly mortgage payment:

Amount Amount $ 10,000.00
$ 47,500.00 Periods 30
$ 3,958.33 Periods per year 12
Interest rate 6%
30% Monthly mortgage payment $ 59.96
$ 1,187.50
$ 250.00
$ 937.50

6%
$ 30.00
$ 59.96
$ 156,367.14

$ 27,000.00
$ 18,090.00

$ 174,457.14

15%
$ 120,600.00

$ 120,600.00
What would the monthly payments be on a $150,000 loan if the mortgage were set up as:

a) Loan $ 150,000.00 b) Loan

Term 15 Term
Periods per year 12 Periods per year
Interest rate 6.00% Margin
Monthly payment $ 1,265.79 Index rate
Monthly payment
$ 150,000.00
30
12
2.50%
4.50%
$ 997.95
 MORTGAGE REFINANCING ANALYSIS

Name: Lin Wong

Item Description Amount

1 Current montly payment $ 1,250.34
Loan $ 162,000.00
Term 25
Periods per years 12
Interest rate 8%
2 New monthly payment $1,065.06
Loan $ 152,401.00
Term 21
Periods per years 12
Interest rate 6%
3 Monthly savings, pretax $185.28
(Item 1 - Item 2)
4 Tax on montly savings $ 27.79
(Item 3 x tax rate)
5 Monthly savings, after-tax $ 157.49
(Item 3 - Item 4)
6 Costs to refinance:
Prepayment penalty $ -
Total closing cost (after-tax) $ 1,500.00
Total refinancing costs $ 1,500.00
7 Months to break even 9.5247