Rent vs. Buy Calculator
Depending on who you ask, it always seems to be a good time to buy real estate for one reason or the other. The current flavor of argument goes something like this:
- The housing market has either bottomed out or does not have too much further to fall;
- Mortgage interest rates are at historical record lows; and
- Rents seem likely to rise given low vacancy rates.
These arguments, however logical they appear, are entirely market-based. Whether or not buying is a better decision than renting depends on many other factors unique to each person’s financial situation. I particularly like this calculator available on the New York Times Website, which lets you see numerous factors. You can enter both the cost to rent vs. the cost to buy and other factors to get some interesting results.
For instance, I entered my information. My rent is $1350 per month and to buy a similar size place in my zip code would cost around $375,000. Since I am self-employed I would likely need a 20% down payment ($75,000). With a mortgage rate of 5.5% and estimated 1.35% annual property taxes, the calculator provided a wealth of information. If I stay here for 6 years, renting is a better option for me and will cost me $78,414 less ($13,069 per year) over buying. If I end up staying longer than six years, eventually buying overtakes renting as the better financial move. While I would like to be able to predict where I will be living in six years, as we all have learned through the last recession, things can change rapidly.