Cost to own vs rent for a year

    There were 2 couples interested in purchasing a home. One couple wants to rent for a year before buying, and the other couple wants to buy now. Both were looking at identical homes for comparison in this scenario.

    Couple A found the perfect pool home valued at $200,000 for rent at $1500 per month. They gave a $1500 security deposit, and a non-refundable pet deposit of $350. The year of living in that home will cost them $18350. They originally qualified to purchase a $200,000 home. After a year, and home values increasing, and interest rate increase, they could now only qualify for a $185,000 home. That same $200,000 home today cost $220,000. They lost $35,000 in buying power, totaling a net loss of $53,350 for waiting a year.

    Cost
    $18,000 Rent
    $ 350 Pet deposit
    $35,000 Loss in buying power
    $53,350 Net loss for the year

    Couple B found a $200,000 home, and offered $195,000 with the buyers contributing $5000 towards closing cost. Couple B put $10,000 down on the home, and covered the extra $1000 in closing cost. The mortgage payment including insurance and taxes is $1295 per month. At the end of the tax year, the couple B gets a federal tax deduction of $14,300 for mortgage interest payments, and a $2500 deduction for property taxes, both saved the owners $2300 in tax savings. The home is also valued at $220,000 at the end of the first year, earning them $20,000 in equity. At the end of the first year, couple B paid $4200 for their first year in the home.

    Cost Return on Investment
    $10,000 Down payment $25,000 Increase in value
    $1000 Towards Closing $ 2,300 Tax Savings
    $15540 Payments $27,300 Total return on Investment
    $26,540 Total

    $ 26,540 Invested
    $-27,300 Return on Investment
    = + $760 Total expense for housing.

    Which couple made the better financial decision for their housing?

    This Scenario is an estimate only of cost, and not on scientific formulas.

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