Saturday, September 28, 2013

Trulia's new Rent vs. Buy Calculator

There is always so much talk about whether it's cheaper to own a home or rent one. There are obvious psychological benefits to owning a home like setting anchor in a community while being able to invest in making improvements in the condition of your home you see fit.

To actually use the on-line calculator, click here: Trulia Rent/Own Calculator

Annual Property Tax: This varies by locality. We use the actual average property tax rate for your metro area. You can also input your personal property tax rate as a percent of your home's value or a national baseline assumption of 1.35%.

Buying Closing Costs: Include loan origination fees, mortgage points, title insurance, appraisal, escrow deposit, fees for running a credit report, and other closing costs.

Discount Rate: The opportunity cost of your money. It reflects what your money would earn as savings or investments other than housing. The higher the discount rate, the more expensive homeownership is because buying a home involves a big upfront payment.

Down Payment: The share of the purchase price you pay upfront. Our baseline assumption is 20%. Putting less than 20% down typically requires mortgage insurance, which is not included in this calculator.

Homeowner's Insurance: Typically required by mortgage lenders. We assume an annual cost of 0.46% of the home's value. Homeowners insurance could be significantly higher if you pay high premiums for risk factors such as floods or earthquakes.

Inflation: Impacts costs such as utilities and renovations, which we assume increase at the rate of inflation.

Long Term Capital Gains Tax: Assessed if the sale price exceeds the original purchase price by $500,000 if filing as married, or $250,000 if filing as an individual. We have assumed a 15% tax rate. Your tax situation might be different.

Mortgage Term: The number of years until the mortgage is paid off. Our baseline assumption is 30 years. Some mortgages have shorter terms such as 15 years.

Renovations: Both regular maintenance and home improvement. We assume homeowners pay 1% annually of the home's value, although this can run significantly higher.

Rent Appreciation: The amount that your rent is likely to increase each year.

Rent Insurance: A policy that covers your personal possessions against perils such as fire, theft, or vandalism. We assume this is 1.32% of your monthly rent. This is not a required cost.

Price Appreciation: The amount that your home is likely to appreciate in value each year, but – be warned -- appreciation is volatile and unpredictable. We make a conservative assumption for each metro area, based on long-term and recent local trends, typically 2-3% per year. This is nominal, not real, appreciation.

Selling Closing Costs: Include the real estate agents' commissions, transfer taxes, title insurance fees, and other closing costs when selling a home.

Utilities: Water, electric, and sewage are often higher for homeowners than for renters. We assume you would pay $100 per month more in utilities as a homeowner than as a renter.

Our methodology compares the total cost of renting with the total cost of buying. To calculate the cost of renting, we start with the monthly rent and add renter's insurance and a refundable security deposit. To calculate the cost of buying, we start with the purchase price and calculate the initial down payment and buyer closing costs; the monthly mortgage payment and other recurring costs like maintenance, property taxes, and insurance; income tax deductions for mortgage interest and property taxes; and the final mortgage payment, sales proceeds, and seller closing costs. These costs depend on numerous assumptions, like your mortgage rate, your income tax rate, how long you stay in a home, and local home price appreciation: we provide baseline assumptions that we encourage you to tailor to your personal situation. Finally, we use a net present value (NPV) calculation to compare the total costs over time of renting versus buying.

We regularly publish our Rent versus Buy report for the U.S. and the 100 largest metros on the Trulia Trends blog. (See Full Methodology)

This calculator is provided for educational and informational purposes only. You should not take any action on the basis of the information provided through this calculator. It relies on assumptions and information provided by you regarding your goals, expectations and financial situation. All figures are hypothetical and may not be accurate indicators of historical or current performance. Past performance does not guarantee nor indicate future results. This calculator does not take into account individual circumstances and should not be relied upon in any way as the sole source of information. Please consult with financial, tax, and legal advisers for any advice relating to your personal circumstances. This service shall not infer that the company assumes any fiduciary duties.

Mark Slade
Keller Williams
Good Homes

Selling a Maplewood/South Orange/Millburn/Short Hills area home involves many steps and having an experienced Maplewood New Jersey Real Estate Agent and Realtor®, specializing in the Bedroom Communities of New York City in Essex/Union County— Millburn, Short Hills, Montclair, West Orange, South Orange, Livingston, Maplewood, Springfield, Summit, Madison, Chatham, Scotch Plains, Fanwood, Cranford and Westfield--by your side will make the transaction run a lot smoother. I would love to be your Maplewood/South Orange New Jersey Area Real Estate Professional! I assist both buyers and sellers in the Bedroom Communities of New York City, mostly served by NJ Transit’s Mid-Town Direct Train Lines, offering commutes of 45minute or less to NY Penn Station, with either the purchase and or sale of residential real estate.

As an Accredited Buyer’s Agent (ABR), I have received special training to guide and educate you through the entire home buying process. From start to finish, I listen to your needs and desires in what you would like and take the information you give me to find you home. My GO-TO team can provide you the best in Real Estate advice with regard to attorney choices, Home Inspectors and Mortgage Loan Officers

As your Maplewood/South Orange/Millburn/Short Hills/Essex/Union County New Jersey listing agent I am well versed on as your local expert in all things in the Maplewood and South Orange area Real Estate Market. You can expect personalized service that includes a detailed consultation on how to best position your Mid-Town Direct home to be competitive in today’s market with training to provide my clients with an in-depth Advanced Comparative Market analysis, and advice on staging. As my office’s technology officer as well as both a Zillow Platinum Premier and Trulia Premier agent, I use the latest and most up-to-date marketing methods to get your home in front of as many buyers as possible. Being your New Jersey Real Estate Agent and Realtor ® not only involves just finding the home or selling the home, but being your guide, negotiator, advisor and advocate and making sure that your needs and goals are met. Being your New Jersey Essex/Union County area Realtor® (with a little bit of Morris County thrown in for good measure) is one of my truest passions, and “Helping You Find Your Dream Home” is my number one priority.

Mark Slade

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