You currently pay $10,000 per year in rent to a landlord for a $100,000 house, w

Question

You currently pay $10,000 per year in rent to a landlord for a $100,000 house, which you are considering purchasing. You can qualify for a loan of $80,000 at 9% if you put $20,000 down on the house. To raise money for the down payment, you would have to liquidate stock earning you a 15% return. We neglect other concerns, like closing costs, capital gains, and tax consequences of owning.

Given the described situation, determine whether it is better to rent or own. Show all your calculations and logical arguments.

Explanation / Answer

ANSWER:

Let us calculate the cost of ownership of the House.

Conclusion :

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