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Buying is better, if you are thinking a bit long term like 4-5+ Years. Now, why I said that: Here’s my story - I had lived in an apartment for 5 years. It’s my

Buying is better, if you are thinking a bit long term like 4-5+ Years. Now, why I said that: Here’s my story - I had lived in an apartment for 5 years. It’s my longest stretch at one place so far. I paid about $100k in rent for all of those years. When I left that place, I got nothing out of it. If I had a house, then I would had built some equity. Edit: removed - ‘Buying is always better’ from the first sentence

dharmab 5y ago
If you are not willing to do at least some DIY repairs, homeownership can become significantly more expensive than renting.
vmception 5y ago
Its a question because “having equity” isnt always the better answer Its how much, what percent of what, how much does it cost you to maintain and service, how long you are looking at Anyway thats the point of the calculator
jjice 5y ago
Always is a strong word. I move around a lot, from 6 to 18 months at a time. The time it would take to search, purchase, and resell a home doesn't make sense in that scenario. Renting gives some flexibility in moving compared to buying. If you're staying in one spot though, then I agree with you more.
MattGaiser 5y ago
Depends on your transaction costs.
reidjs 5y ago
Buying doesn’t make sense if 1. You can’t afford to own a home near your work 2. There’s a chance you will not stay in your current job for more than a few years 3. You don’t like DIY or home maintenance 4. You’re single and want to live near other single people
- tiborsaas 5y ago
  How does 4 makes sense? Property can be an apartment too in downtown, in case you pictured buying a house in the suburbs.
  - scaryclam 5y ago
    None of the points make sense really. They are more about their own priorities rather than good advice. 4 is just especially weird.
jartelt 5y ago
The first several years of the mortgage you are paying mostly interest and not as much towards equity. Plus, you have paid closing costs when you bought, will pay 6% to a realtor when you sell, and have paid property tax and homeowners insurance. If you sell after 5 years, you are only making money if your home value happened to have gone up. This is by no means a guarantee on a short time frame.
- jmvoodoo 5y ago
  So don't sell. Rent the house, take the income and move on. I'm building house #8 right now and the rent from the other homes (some of which are now paid off) provides an income to my family that would keep them housed and fed should something happen to me. Of course, you have to consider this when you buy because many homes are terrible investments. If you come in with the view that you're buying what will eventually be an investment property you'll make better buying decisions.
- hatch_q 5y ago
  Interesting. In EU, max interest paid per annuity is 10% and 90% goes to equity. Also property taxes seem steep in USA.
- mrfredward 5y ago
  I am a few months in to a 15 year mortgage after recently refinanced at a 2.125%. Here's a rough breakdown of where each dollar of my last mortgage payment went: Principal: 60% Interest: 22% Escrow(Taxes + Insurance): 18% And of course the percentage going to interest only goes down with each passing month. The conventional wisdom that you are paying mostly interest in the beginning a) really only applies to 30 year mortgages, and b) was way more true when interest rates were higher. We're currently near some of the lowest interest rates in history, so interest eats a lot less than it used to. I'll add that I pay a good bit less on my mortgage than it takes to rent an equivalent place in my area. But yes, paying 6% to realtors when you sell is huge, so you still need to own the house a few years for buying to make sense.
  - jartelt 5y ago
Aulig 5y ago
No it's not. In many cases it can be beneficial to rent and invest your money instead, as stocks have a higher longterm ROI than property.
- mandeepj 5y ago
  Does it have to be mutually exclusive? My current mortgage and previous rent are almost the same. A friend of mine bought his house in 2011-2012 for $200k. Now, it's worth ~$500k. >stocks have a higher longterm ROI than property. That's debatable. And, it depends at what point you were in and for how long you can stay as there'll be set backs during the ride. Unfortunately, if you have to cash out due to emergency during a dip then ROI would not be favorable.
  - Aulig 5y ago
    Selling your house in an emergency would be similarly bad as exiting the stock market at an unfortunate time. The long-term ROI after costs and inflation of stocks (global) is about 3% higher p.a. than of property (global). Unfortunately this source is in german, but it cites research papers too, you can check those for further investigation: https://www.gerd-kommer-invest.de/die-rendite-von-direktinvestments-in-wohnimmobilien-besser-verstehen/ https://www.gerd-kommer-invest.de/die-rendite-von-direktinve...
    - alach11 5y ago
      Buying a house can have an advantage over stocks in the leverage you get with a mortgage, and in certain cases tax incentives. Whether that’s enough to compensate for the better returns of stocks is the hundred thousand dollar question.
      - Aulig 5y ago
        Tax incentives depend on your legislation, but they can make a difference, yes. Leverage also comes with higher risk, which makes it a bit of an unfair comparison in my opinion. If you really wanted, you could also use leverage on your stock investments, but I personally would never do that.
nobleach 5y ago
> I got nothing out of it That would be true if you paid that rent, and then went and lived outside in a cardboard box. You DID get something out of it. You got a place to live (potentially maintenance free)
quickthrower2 5y ago
The point of a calculator is to check this. If you could have invested more money in retirement account because you are renting you might end up ahead.

dharmab 5y ago

If you are not willing to do at least some DIY repairs, homeownership can become significantly more expensive than renting.

vmception 5y ago

Its a question because “having equity” isnt always the better answer Its how much, what percent of what, how much does it cost you to maintain and service, how long you are looking at Anyway thats the point of the calculator

jjice 5y ago

Always is a strong word. I move around a lot, from 6 to 18 months at a time. The time it would take to search, purchase, and resell a home doesn't make sense in that scenario. Renting gives some flexibility in moving compared to buying. If you're staying in one spot though, then I agree with you more.

MattGaiser 5y ago

Depends on your transaction costs.

reidjs 5y ago

Buying doesn’t make sense if 1. You can’t afford to own a home near your work 2. There’s a chance you will not stay in your current job for more than a few years 3. You don’t like DIY or home maintenance 4. You’re single and want to live near other single people

tiborsaas 5y ago
How does 4 makes sense? Property can be an apartment too in downtown, in case you pictured buying a house in the suburbs.
- scaryclam 5y ago
  None of the points make sense really. They are more about their own priorities rather than good advice. 4 is just especially weird.

jartelt 5y ago

The first several years of the mortgage you are paying mostly interest and not as much towards equity. Plus, you have paid closing costs when you bought, will pay 6% to a realtor when you sell, and have paid property tax and homeowners insurance. If you sell after 5 years, you are only making money if your home value happened to have gone up. This is by no means a guarantee on a short time frame.

jmvoodoo 5y ago
So don't sell. Rent the house, take the income and move on. I'm building house #8 right now and the rent from the other homes (some of which are now paid off) provides an income to my family that would keep them housed and fed should something happen to me. Of course, you have to consider this when you buy because many homes are terrible investments. If you come in with the view that you're buying what will eventually be an investment property you'll make better buying decisions.
hatch_q 5y ago
Interesting. In EU, max interest paid per annuity is 10% and 90% goes to equity. Also property taxes seem steep in USA.
mrfredward 5y ago
I am a few months in to a 15 year mortgage after recently refinanced at a 2.125%. Here's a rough breakdown of where each dollar of my last mortgage payment went: Principal: 60% Interest: 22% Escrow(Taxes + Insurance): 18% And of course the percentage going to interest only goes down with each passing month. The conventional wisdom that you are paying mostly interest in the beginning a) really only applies to 30 year mortgages, and b) was way more true when interest rates were higher. We're currently near some of the lowest interest rates in history, so interest eats a lot less than it used to. I'll add that I pay a good bit less on my mortgage than it takes to rent an equivalent place in my area. But yes, paying 6% to realtors when you sell is huge, so you still need to own the house a few years for buying to make sense.
- jartelt 5y ago

Aulig 5y ago

No it's not. In many cases it can be beneficial to rent and invest your money instead, as stocks have a higher longterm ROI than property.

mandeepj 5y ago
Does it have to be mutually exclusive? My current mortgage and previous rent are almost the same. A friend of mine bought his house in 2011-2012 for $200k. Now, it's worth ~$500k. >stocks have a higher longterm ROI than property. That's debatable. And, it depends at what point you were in and for how long you can stay as there'll be set backs during the ride. Unfortunately, if you have to cash out due to emergency during a dip then ROI would not be favorable.
- Aulig 5y ago
  Selling your house in an emergency would be similarly bad as exiting the stock market at an unfortunate time. The long-term ROI after costs and inflation of stocks (global) is about 3% higher p.a. than of property (global). Unfortunately this source is in german, but it cites research papers too, you can check those for further investigation: https://www.gerd-kommer-invest.de/die-rendite-von-direktinvestments-in-wohnimmobilien-besser-verstehen/ https://www.gerd-kommer-invest.de/die-rendite-von-direktinve...
  - alach11 5y ago
    Buying a house can have an advantage over stocks in the leverage you get with a mortgage, and in certain cases tax incentives. Whether that’s enough to compensate for the better returns of stocks is the hundred thousand dollar question.
    - Aulig 5y ago
      Tax incentives depend on your legislation, but they can make a difference, yes. Leverage also comes with higher risk, which makes it a bit of an unfair comparison in my opinion. If you really wanted, you could also use leverage on your stock investments, but I personally would never do that.

nobleach 5y ago

> I got nothing out of it That would be true if you paid that rent, and then went and lived outside in a cardboard box. You DID get something out of it. You got a place to live (potentially maintenance free)

quickthrower2 5y ago

The point of a calculator is to check this. If you could have invested more money in retirement account because you are renting you might end up ahead.