You currently pay $10,000 per year in rent to a landlord for a $100,000 house. You can qualify for a loan of $80,000 at 9% if you put $20,000 down but you would have to liquidate stock earning a 15% return. What is better? To rent or own?© BrainMass Inc. brainmass.com October 10, 2019, 5:01 am ad1c9bdddf
We need to look at a few different things in this problem. The interest payments on the loan would be 80,000 x 9% = 7,200. The stock return is 20,000 x 15% = 3,000. We can immediately see that the cost of owning the home would equal 7200 + 3000 = 10,200 ...
This solution discusses whether or not it would be better to rent or to own.