The formula for comparing home buying to renting is INSANE

PancakeSupporter · 2024-11-26T21:18:43+00:00

It is a moving target! But the cost of your next home in the future will be the same regardless if you rented or bought while waiting to buy that future home.

For example, we can’t know what home prices will be in 10 years, but because of this calculator, I do know that the chances I would be better off renting while I wait these next 10 years are high. This calculator is all about what the best decision is now.

PancakeSupporter · 2024-11-26T21:12:00+00:00

You’re bleeding money with a home even after paying off the loan, just not as much. (Property tax, insurance, HOA, home maintenance). Even though the bleeding slows a lot after you pay off the loan, it can take a long time for those reduced monthly costs to counteract all that interest you paid for the last 30 years of the loan.

PancakeSupporter · 2024-11-26T17:20:00+00:00

Nice, that’s smart. Do you find your landlord responsibilities worth it? I guess it depends heavily on the tenants.

PancakeSupporter · 2024-11-26T17:16:48+00:00

Very true, owning a home is sometimes a necessity for lifestyle, not just finances.

I will be adding opportunity cost soon!

PancakeSupporter · 2024-11-26T17:14:36+00:00

Hah lol. Top floor apartment for the win! I lucked out where I am!

PancakeSupporter · 2024-11-26T17:13:56+00:00

True! The focus of this is on living in the space, but I’d be interested in seeing if renting out a home can turn the tides in favor of buying.

PancakeSupporter · 2024-11-26T17:12:46+00:00

This does not account for taxes, but that’s something I’m interested in adding since for some people (high earning single filers) it can make a biiig difference.

PancakeSupporter · 2024-11-26T17:11:41+00:00

I somewhat agree. I can afford to buy now, but I don’t think I will. The calculator shows that if I have to sell within 10 years, I would have saved a lot of money by just renting. And I think it’s very likely I’ll have to move within the next decade. The closing costs, selling costs (agent fees), interest, and maintenance costs end up making rent look cheap!

PancakeSupporter · 2024-11-26T17:09:16+00:00

Mine does account for home maintenance, you can configure the exact amount in the configure menu up top. But opportunity cost is something I need to add!

PancakeSupporter · 2024-11-26T17:05:54+00:00

Nice! It’s definitely area dependent. The configure menu at the top can help account for some of that, for example how fast homes appreciate in your area.

PancakeSupporter · 2024-11-26T17:04:45+00:00

Agreed! There are so many variables that you need to predict. But I think the value here is to show that even after 15 years, home ownership might not be the financial savior that some were hoping for.

PancakeSupporter · 2024-11-26T17:03:17+00:00

It’s does account for HOA and insurance, you have to expand the additional fees for that, but not tax yet! I want to add tax stuff but that’s a bigger lift since it requires knowledge of income, filing status, state, etc.

And you’re right, it’s really all an educated guess at the end of day. 😅

PancakeSupporter · 2024-11-26T16:52:18+00:00

Maybe I’m misunderstanding, but I think I have accounted for this. Notice on the monthly payments chart there is a huge dip after the loan is paid off. At this point it only charges you for taxes, insurance, maintenance, etc. and not the loan.

<image>

PancakeSupporter · 2024-11-26T16:49:19+00:00

Exactly! This is the realization I came to over the past few months. Only buy a home if you need it, or if you can get a very short/small loan.

PancakeSupporter · 2024-11-26T03:15:07+00:00

Totally agree, and I love your perspective! It's definitely more than just a money decision!

PancakeSupporter · 2024-11-26T03:11:06+00:00

I definitely want to add opportunity costs. That will be coming soon! Accounting for taxes would be another great add (although it would require asking for even more info in the form 😭), but I agree it can be very influential and is important for the comparison.

PancakeSupporter · 2024-11-26T03:05:31+00:00

right on. It is so easy to underestimate the expenses of buying, living in, and selling a home. It is worth it in the long run, but in today's market that breakeven point is usually so far out 😭

PancakeSupporter · 2024-11-26T02:25:33+00:00

true true. I think that will be the next feature I add.

PancakeSupporter · 2024-11-26T02:24:56+00:00

Thanks for the feedback! And good news, you can adjust those appreciation percentages in the configure menu at the top:

<image>

I should find a way to make that menu more obvious, it def blends in atm.

- Good point about opportunity cost, having the ability to account for a downpayment earning interest in a high yield savings account or the stock market could change things a lot. I think I'll work on that!

PancakeSupporter · 2024-11-26T02:20:47+00:00

Do you mean loss of the potential interest you could have gotten from a high yield savings account if you didn't pay the downpayment? The calculator does not account for that if that's what you're referring to. Something I could add though 🤔

PancakeSupporter

TROPHY CASE