When considering the pros and cons of renting versus purchasing a home, one of the angles to consider would be to contrast the rent with the actual mortgage payments. For the problem below, consider that you will be itemizing your deductions under either scenario in order to make it a fair comparison. Do not put commas in your answers.
Assume you know in advance that you are in the 10% bracket (in terms of federal income tax), that your apartment rents for $950 per month, and that a potential monthly mortgage payment for a home is $1100 with an average of 85% of the payment dedicated to mortgage interest, which is tax deductible. The total rent for one year would be ???? and the total actual mortgage payments (after the tax deduction due to interest) would be ????
