The Bainters anticipate they will live in the area for a minimum of 15 years. They want to estimate how much they will spend each year after 1 year, after 5 years, after 10 years, and after 15 years.
The Bainter family is moving to a new town and needs a place to live. The Bainters have narrowed their search to two houses they think will work for their family.
- The first house is a rental. The monthly rent is listed at $1,190, with the expectation that it will increase 1.7% each year.
- The second house is available for purchase. The sale price is listed at $195,000, and the Bainters have been approved for a loan that would allow them to purchase the home and pay for it over 30 years.
Cost of Renting
To estimate the cost of renting, the Bainters read through the rental agreement to determine for what types of costs they would need to budget. These costs include fees, renters' insurance, and utilities. The Bainters also research average prices for anything the landlord would not provide, such as renters' insurance.
The Bainters realize they will have approximately the same costs for electricity and natural gas whether they rent or purchase, so they decide to exclude these costs from their calculations. The only expenses the Bainters have if they rent instead of purchase are
- an annual $75 cleaning fee
- an annual $450 pet fee
- an estimated monthly $17 fee for renters' insurance
The Bainters anticipate they will live in the area for a minimum of 15 years. They want to estimate how much they will spend each year after 1 year, after 5 years, after 10 years, and after 15 years.
For example, before the Bainters live in the house for a full year, the rent is $1,190 per month and the renters' insurance is $17 per month, and they have a cleaning fee of $75 and a pet fee of $450. The total housing cost for the year the Bainters move in would be $15,009.
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