The choice between buying a home or renting one is among the biggest financial decisions that many adults make. The costs of buying are more varied and complicated than for renting, making it hard to tell which is a better deal. To help you answer this question, The New York Times has developed a calculator to help you answer these questions. It takes the most important costs associated with buying a house and computes the equivalent monthly rent.
This calculator keeps a running tally of the most common expenses of owning and renting and tabulates opportunity costs for all aspects of the buying and renting process:
Some things to consider in the decision making are:
- Costs of buying and selling
- Length of mortgage
- Interest rate
- How long you plan to stay
- Property taxes
- What the future holds for the real estate market
Buying tends to be better the longer you stay because the upfront fees are spread out over many years. However, how often home prices, rents, and stock prices change, can have a large impact on your outcome. Unfortunately, these are some of the hardest things to predict. Owning a home comes with a surprising variety of expenses that renters do not directly pay. Such as, mortgage payments, condo fees (or other community living fees), maintenance, renovation costs, property taxes and homeowner’s insurance. Property taxes and mortgage interest costs, in some cases are deductible. The higher your marginal tax rate is, the bigger the deduction.
There are also the costs on top of rent to consider such as, the fee you may pay to a broker and the opportunity cost on your security deposit. Also, any damages incurred to the rental property will be your responsibility.
Making sure you have considered all aspects of both situations before making a decision, will help you feel confident and comfortable in your new home.
Article ideas by: Mike Bostock, Shan Carter and Archie Tse