Mr. Brady spends 1250 dollars a month on the rent for the home he lives in.
He could purchase the property for 98,000. The fire insurance is $225.00 annually. Taxes are $1464.00 a year. The upkeep of the home is 1.5 % of the cost of the property, and the annual depeciation is 2% of the property cost. He could borrow at 4.5 % annual interest rate.
1. What would be the total cost of owning the home for the first year?
2. How much money would he save instead of renting?
1. $7965 for owning the first year.
2. $7035 the first year in savings.
First let's multiply 12 times 1250 to find out how much Mr. Brady is spending a year renting the home, and we find that it's costing him 15,000 a year.
Now, he borrows 98k at 4.5% annually, and the interest on the loan is 4410 dollars a year at 4.5% per annum, which, divided by twelve equals 367.50.
The annual taxes are 1464 dollars and the annual fire insurance is 225 dollars, for a total of 1689 dollars.
The upkeep of the house is 1.5% of the purchase price of 98,000, and we get 1470 annual upkeep.
The annual depreciation is 2% of the purchase price which gives us an annual depreciation of 396 dollars for the first year.
Add 4410 in interest annually, 1464 in taxes for the first year, 225 dollars a year for fire insurance, annual up keep of 1470, and the depreciation of 396 dollars for a total of 7965 dollars for the first year of owning the home.
Now, subtract 7965 from 15000 and we discover that Mr.Brady will save 7035 dollars by owning the home the first year.
A reason to hop for joy !
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