Calculate the remaining balance of the loan after five years.
The Rent or Buy Decision
The question of whether to rent or purchase a residence is not always easy to
answer, especially when the time period over which you would own or rent a
house is short. This program performs an analysis which could be helpful in
reaching a decision. Essentially, it calculates a yield or rate of return on the
proposed investment. This yield may be compared with the yield obtained by
renting a residence and investing the down payment and monthly payment
differences in a savings account or other investment opportunity. This program
takes into account the tax advantages obtained by a home owner on property
taxes and mortgage interest.
First the program computes the Net Cash Proceeds upon Resale (NCPR),
yield on the investment in the house and then the value of the hypothetical savings
account at the end of the investment period. A comparison of the NCPR and the
final balance of the savings account and a comparison of the yields should aid in
determining whether to rent or buy.
The Net Cash Proceeds upon Resale ( NCPR = sales price – commission – mortgage balance),
is the pre-tax proceeds. The program assumes that the buyer reinvests in like property and is
not subject to capital gains tax.
Section 12: Real Estate and Lending
Number of periods to
Remaining balance of
the loan after five years.
New life of loan.
Percent monthly yield.
Percent annual yield.