Should I Buy or Rent? A mathematical guide to help you keep up with the Joneses
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1 July 2011
Principle to mortgage payment ratio
The division between your equity and the interest you pay the bank is based on several factors:
- amortization period
- interest rate (variable and fixed)
- term length
Currently you can get a variable interest rate mortgage at approximately 2%, and a fixed rate mortgage around 5%. At 2% you are effectively doubling your principle payment to your mortgage. The risk is that your mortgage payment will increase over time, while you principle contribution will diminish.
Page 1 ROI sensitivity to monthly rent
Page 2 ROI sensitivity to housing growth
