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168 Section 12: Real Estate and Lending
File name: hp 12c pt_user's guide_English_HDPMF123E27 Page: 168 of 275
Printed Date: 2005/8/1 Dimension: 14.8 cm x 21 cm
Example:
You are being transferred for 4 years to a distant city and are faced
with the decision of whether to rent or to buy a house. A quick survey of the
housing market indicates that you can purchase an acceptable house for
$270,000 with a $7,000 down payment on a 30-year mortgage at 6% interest.
The closing costs would be about $3,700. Selling costs include a 6% commission
for resale and miscellaneous other fees that amount to another 2% of the sale price.
Housing in the area is appreciating 5% per year. Property taxes would be about
$300 per month, and you estimate that maintenance would cost an additional
$165 per month.
An alternative would be to rent a similar dwelling at $900 per month and to invest
the difference between the purchase cost and rent at 3% interest. Your personal
income tax rate (marginal) is 25% Federal and 5% State. Which alternative is
more financially attractive
?
Keystrokes
(RPN mode)
Keystrokes
(ALG mode)
Display
f]
f[
gÂ
gÂ
f
CLEAR
H
f
CLEAR
H
0.00
7000
?
1 7000
?
1
7,000.00
Down payment.
30
?
2 30
?
2
30.00
Life of mortgage.
6
?
3 6
?
3
6.00
Interest rate.
300
?
4 300
?
4
300.00
Property taxes.
165
?
5 165
?
5
165.00
Monthly expenses.
3700
?
6 3700
?
6
3,700.00
Closing costs.
8
?
7 8
?
7
8.00
Resale costs (as a
percentage).
900
?
8 900
?
8
900.00
Rent.
3
?
9 3
?
9
3.00
Savings interest rate.
30
?.
0 30
?.
0
30.00
Tax bracket.
f
CLEAR
G
f
CLEAR
G
30.00
Clear financial registers.
4
n
4
n
4.00
Years in investment.
5
¼
5
¼
5.00
Yearly appreciation rate.
270000
$
270000
$
270,000.00
House price.
t
t
53,095.65
NCPR (calculated).