Transcript File - Stephanie Stevens

Project Part 3
Math 1050-040-F12
Buying a
Home Vs.
Renting
Group 1: Elizabeth Anderson, Natalie Christner, Val Denter, Jason Holmes, and
Stephanie Stevens
Introduction
For 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.
Advantages of Buying
Tax 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.
Disadvantages Of Buying
Maintenance- 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 Renting
No 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 Renting
Rent- 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
Build your equity faster than a 30 year
With your lower payment, you have the
ability to put more money toward principal
each month, essentially paying it off sooner
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:
•
𝑃𝑀𝑇 =
𝑟
12
𝑟
1−(1+ )−12𝑦
12
𝑃( )
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 Info
Jason
30 Year Fixed Rate
•
•
•
•
•
House Price
Down Payment
Mortgage Amount
Interest Rate
Monthly Payment
$197,000.00
$19,700.00
$177,300.00
3.44%
$790.23
.0344
177,300(
)
508.26
508.26
12
𝑃𝑀𝑇 =
=
=
= 790.23
.0344 −12(30)
.0344 −360
.643179927
1 − (1 +
)
1 − (1 +
)
12
12
15 Year Fixed Rate
•
•
•
•
•
House Price
Down Payment
Mortgage Amount
Interest Rate
Monthly Payment
$197,000.00
$19,700.00
$177,300.00
2.84%
$1210.80
.0284
177,300(
)
419.61
419.61
12
𝑃𝑀𝑇 =
=
=
= 1210.80
.0284 −12(15)
.0284 −180
.346554858
1 − (1 +
)
1 − (1 +
)
12
12
Mortgage Rates and Payment Info
Natalie
30 Year Fixed Rate
•
•
•
•
•
House Price
Down Payment
Mortgage Amount
Interest Rate
Monthly Payment
𝑃𝑀𝑇 =
$249,999.00
$24,999.90
$224,999.10
3.3%
$985.40
.033
)
12
.033 −12(30)
1−(1+
)
12
224999.10(
=
618.75
1−(1.00275)−360
=
618.75
.6279
=985.40
15 Year Fixed Rate
•
•
•
•
•
House Price
Down Payment
Mortgage Amount
Interest Rate
Monthly Payment
𝑃𝑀𝑇 =
$249,999.00
$24,999.90
$224,999.10
2.689%
$1520.37
.02689
)
12
.02689 −12(15)
1−(1+
)
12
224999.10(
=
6050.23
1−(1.0022)−180
=
6050.23
.9801
=1520.37
Mortgage Rates and Payment Info
Val
30 Year Fixed Rate
•
•
•
•
•
House Price
Down Payment
Mortgage Amount
Interest Rate
Monthly Payment
$139,000.00
$13,900.00
$125,100.00
3.625%
$570.52
𝑃𝑀𝑇 =
.03625
)
12
.03625 −360
1−(1+ 12 )
125,100(
=
377.90625
.6623889286
=570.52
15 Year Fixed Rate
•
•
•
•
•
House Price
Down Payment
Mortgage Amount
Interest Rate
Monthly Payment
$139,000.00
$13,900.00
$125,100.00
2.875%
$856.42
𝑃𝑀𝑇 =
.02875
)
12
.02875
1−(1+ 12 )−180
125,100(
=
299.71875
.3499683481
=856.42
Mortgage Rates and Payment Info
Stephanie
30 Year Fixed Rate
•
•
•
•
•
House Price
Down Payment
Mortgage Amount
Interest Rate
Monthly Payment
𝑃𝑀𝑇 =
$199,000.00
$19,900
$179,100.00
3.52%
$806.24
.0352
)
12
.0352 −12(30)
1−(1+ 12 )
179,000(
=
179,00(0.002933333)
1−0.348382515
=
525.3599403
.65167485
=806.24
15 Year Fixed Rate
•
•
•
•
•
House Price
Down Payment
Mortgage Amount
Interest Rate
Monthly Payment
𝑃𝑀𝑇 =
$199,000.00
$19,900
$179,100.00
2.84%
$1223.10
.0284
)
12
.0284 −12(15)
1−(1+
)
12
179,000(
=
179,00(0.002366667)
1−0.653445142
=
423.8400597
.346554858
=1223.10
Mortgage Rates and Payment Info
Elizabeth
30 Year Fixed Rate
•
•
•
•
•
House Price
Down Payment
Mortgage Amount
Interest Rate
Monthly Payment
$120,000.00
$6000.00
$114,000.00
3.57%
$516.38
.0357
)
12
.0357 −12(30)
1−(1+ 12 )
114000(
𝑃𝑀𝑇 =
=
339.15
.657
=516.38
15 Year Fixed Rate
•
•
•
•
•
House Price
Down Payment
Mortgage Amount
Interest Rate
Monthly Payment
$120,000.00
$6000.00
$114,000.00
3.002%
$787.37
𝑃𝑀𝑇 =
.03002
)
12
.03002 −12(15)
1−(1+
)
12
114000(
=
285.19
.362
=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.
Credits
Jason - Kept us all coordinated and Mortgage Options
Val – Buying vs. Renting
Stephanie – Introduction
Elizabeth – Purpose and Conclusion
Natalie – Slide Animations/Transitions, Backgrounds, and Credits