(Calculator | Example | Definitions | Application Notes)
This program will demonstrate the effect of your decision on your wealth over the next 5, 10, 15, and 30 years. For example, imagine the following:
Through reading advertisements and visiting open houses, you determine that rent will cost you $1,000 per month, with an additional $200 in expenses such as tenant's insurance. The house you would like to buy sells for $150,000, with an additional $400 in expenses, such as home insurance, taxes, etc. We can make reasonable assumptions about expected return on the investment in the home, and alternative investments such as mutual funds. Let's assume that the after-tax return on investment in the home is 3%, while alternative investments earn 7.0%. Note that you do not pay tax on the capital gains on your home, but you do pay tax for many other investments. It is therefore important to note that the return figures are after tax. From this example, we see that the decision to buy or rent may depend on your personal horizon. Do you expect to sell your house in five years and retire to Victoria? Or do you have a young family and no expectation of relocating out of your area? The program suggests that time horizons are important considerations. Change the variables to fit your circumstances and to see how the results change, however, be sure to enter realistic variables to generate the most useful results. |
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