Summary of Terms and Calculations

This calculator compares the financial benefits of investing in a home through a mortgage versus investing in the S&P 500 index over a 30-year period. Here are the key terms and the calculations involved:

Key Terms:

• Annual Income: Your yearly earnings before taxes.

• Tax Rate (%): The percentage of your income paid in taxes.

• Home Price: The total cost of the home you plan to purchase.

• Down Payment: The initial amount paid upfront for the home.

• Mortgage Rate (%): The annual interest rate on the mortgage.

• Mortgage Term (years): The number of years over which the mortgage will be paid off.

• PMI: Private Mortgage Insurance, an additional monthly cost if your down payment is less than 20% of the home price.

• HOA: Homeowners Association fees, a monthly cost for maintaining common areas in your community.

• Property Tax: An annual tax paid to the local government based on the value of your property.

• Insurance: Annual homeowners insurance cost.

• S&P 500 Return (%): The expected annual return on investment in the S&P 500 index.

• Home Appreciation (%): The expected annual increase in the value of your home.

Calculations:

• Monthly Mortgage Payment: Calculated using the formula for a fixed-rate mortgage, taking into account the principal, interest rate, and term.

• Yearly Costs: Total annual expenses including mortgage payments, PMI, HOA fees, property tax, and insurance.

• Tax Savings: The difference in taxable income between itemizing deductions for mortgage interest and property tax versus taking the standard deduction.

• Home Equity: The value of the home minus the remaining mortgage balance.

• Mortgage Gain: The total value gained from the home investment, including home equity, tax savings, and costs deducted.

• S&P 500 Gain: The total value gained from investing in the S&P 500, considering the annual return and reinvestment of yearly costs saved from not purchasing a home.

Note: This is a simplified calculation and should not be used for actual financial decisions. Please consult a financial advisor for personalized advice.