Buying Vs. Renting

This calculation arbitrarily assumes that 10 percent of your mythical mortgage payment would cover home owner’s insurance and principal repayment, with the rest going for deductible interest and property taxes. It also assumes your top tax bracket (known to accountants as your marginal tax rate) is 28 percent. If your tax bracket is higher, your tax savings will be correspondingly higher. 

A. Your present rate 
$ ______________________________

B. Multiply by 1.32      x 1.32

C. Equivalent monthly Mortgage payment  
$ ______________________________

The result (line C) is a rough estimate of the amount you could spend for monthly mortgage payment (principal, interest, property taxes and homeowner’s insurance) without being out any  more money at the end of the income tax year than you are with your present rental.