21 ms·

Author here. Thought I’d highlight my favorite, perhaps non-obvious feature: the slope of the charts tells you whether the variable is positively or negatively

Author here. Thought I’d highlight my favorite, perhaps non-obvious feature: the slope of the charts tells you whether the variable is positively or negatively correlated with the cost of buying. And depending on the settings, that slope can change from positive to negative. For example with the defaults, the down payment chart is flat. This means the total cost of buying is relatively unaffected by the size of your mortgage. Felix Salmon pointed out this demonstrates the Modigliani–Miller theorem: http://en.wikipedia.org/wiki/Modigliani–Miller_theorem http://en.wikipedia.org/wiki/Modigliani–Miller_theorem Of course, there’s still a big intangible difference between having debt and not having debt, like your ability to respond to market or income changes. And in an inefficient market, loans can be more or less expensive. Playing with the variables and seeing slopes change from positive to negative or vice versa is interesting, too, because these suggest different optimal decisions. Like as your investment return rate goes up, the down payment slope becomes increasingly positive — meaning when stocks are doing well (and assuming mortgage rates aren’t also going up), it’s better to have a smaller down payment and put more money into investments. To a lesser degree, your marginal tax rate changes the slope of the down payment as well, by discounting the mortgage interest payments. The magnitude of the slope also gives a sense of your risk: you can see how sensitive the equivalent rent estimate is to small changes.

krschultz 12y ago
This is a really awesome tool, and as someone in NYC currently debating renting vs buying it is very useful. I used to pass around the old NYTimes Rent V Buyer calculator often when people started thinking about the topic, I definitely will send this one out instead.
NoMoreNicksLeft 12y ago
> Of course, there’s still a big intangible difference between having debt and not having debt, Both renters and owners need a place to live in the future, assuming they're not dead. If we exclude those who live with mommy and daddy or mooch off of other people... Well, then whether the debt is formal with a mortgage or not makes little difference. Even renters are on the hook to come up with $1000 for the month of October 2016. It's just not in writing.
- deleted 12y ago
  [deleted]
- fspeech 12y ago
  The main problem with owning is illiquidity and associated immobility. If you rent you can quickly down shift if you run into trouble. If you own the transaction cost is much higher if you need to move. The main advantage of owning one's own residence is tax and stability (the flip side of the illiquidity problem). Owner's equivalent rent is not a taxable income. Capital appreciation works in your favor rather than against you when you rent. In short owning one's own home is both economically and psychologically rewarding if you have long term stable income.
  - NoMoreNicksLeft 12y ago
    > The main problem with owning is illiquidity and associated immobility. If you rent you can quickly down shift if you run into trouble. Where are you getting these lease-free rental units? True, you're less on the hook with a 12 month lease, and the liability is lower than a 30 year mortgage... But this is a very mild difference. That job's not going to wait for you to sell your house or for your lease to end. > If you own the transaction cost is much higher if you need to move. If you own, then eventually you're not paying anything at all for a place to live. And don't bother to mention property tax... you're paying that if you rent, too, it's just hidden. This is a manufactured debate, it's meant to appeal to twentysomethings' bohemian aspirations. Someone wants them mobile so they can herd them around like migrant workers.
    - sheepmullet 12y ago
      Breaking lease is far simpler and cheaper than selling. It's never taken me more than 2-3 weeks to find someone to take over the lease whereas it can take months to sell a house. Because of this ease whenever I move jobs I always move house to be closer to work (after passing probation) because in my area changing jobs can easily add an hour a day to your commute.
      - 12y ago
dmnd 12y ago
I've been using the old version of this for a few months. Making it obvious to which parameters the result is most sensitive is a huge improvement, thank you and well done!
- mbostock 12y ago
  Thanks, that’s good to hear. There’s always a risk releasing a new version of a popular tool. For those that still want to use the old one I think we’ll find a new home for it, too.
  - ernestipark 12y ago
    I really do like this new version as it seems easier to answer the main question at hand. I did like some aspects of the older one though (all #s more easily digestible, the big graph) so seeing it in a new home would be nice.
hkmurakami 12y ago
Huge props for including things like the Marginal Tax rate for tax deduction and closing costs, which most of my peers that I've spoken to are unaware of or fail to take into consideration properly. I just recently had a conversation with a friend about renting vs buying, and I raced through many of the factors in this calculator to demonstrate that it's not such a simple question and that there are many factors that depend on one's financial (and other) situation, but it totally went over her head bc I was going way too fast. I'll definitely use this page when explaining things to my friends in the future. Thanks so much :)
- mahyarm 12y ago
  Wow, the marginal tax rate pretty much cut the rental limit in half, the difference is that big.
  - leishulang 12y ago
    why higher marginal tax rate makes buying better? I don't get it.
    - dragonwriter 12y ago
      Higher marginal tax rates increases the $ value of mortgage interest deduction for the same amount of mortgage interest payment (since a deduction reduces taxable income, but the amount of reduction in actual tax liability is the reduction in taxable income times the marginal tax rate.)
      - leishulang 12y ago
        I see, but most mortgage doesn't have interest income tax deduction here in Canada? edit: Just check interweb, only mortgage that being used to invest for more incomes are eligible for tax reduction in Canada, thus more trouble to convert a house mortgage to investment mortgage.
- kenrikm 12y ago
  I used it to calculate if buying my house was a better deal than renting. Turns out over 30 years it was exactly the same.. down to the dollar.
jliptzin 12y ago
Really valuable stuff here. Thanks. One small addition I'd consider adding is estimated rental income if you buy and plan to rent out a portion of the property. I am in the process of buying a home right now and plan to do just that, but this factor seems to be missing from the chart.
- mbostock 12y ago
  Thanks, that’s a good suggestion. There are additional tax considerations with second homes (and business properties), but it’d be nice to include these in the model.
arjunnarayan 12y ago
Do you have a link to Felix Salmon pointing out that this demonstrates Modigliani-Miller? Edit: Thanks!
- mbostock 12y ago
  https://twitter.com/felixsalmon/status/469311904582627329 https://twitter.com/felixsalmon/status/469311904582627329
  - arjunnarayan 12y ago
    But it looks like Down Payment doesn't affect the result conditioned on holding the Mortgage Rate constant. I'm not so sure that's a good assumption. I imagine the down payment strongly affects the mortgage rate you'd get.
    - judk 12y ago
      The M-M theorem is one of those pretty void theorems that says "in the absence of all real world factors, two abstsct models are mathematically equivalent structures".
kpommerenke 12y ago
According to the Modigliani–Miller theorem, the mix of debt (size of mortgage) and equity (down payment) is only irrelevant in a world without taxes. However, mortgage interest is tax deductible, while rent is not, so their result doesn't apply here. The flat down payment chart is a coincidence, based on the default values for interest and inflation rates, growth rates and expected returns.
- mbostock 12y ago
  I don’t think it’s a coincidence — those default values reflect the current market, and it’s a reflection of the market being fairly efficient. For example, if investment return rates were consistently higher, you could expect mortgage rates to rise as well. Taxes introduce some inefficiency, but I think the broader point still holds.
deleted 12y ago
[deleted]
pessimizer 12y ago
Your mentioning of this made me check out the graphs again - and I noticed that the graph depicting the size of a down payment was flat. That could only mean one thing: the cost of mortgage insurance (that you will be forced to get if your down payment is lower than 20%) hasn't been included. That's a major cost on low down-payment house purchases. Intentional or oversight? https://en.wikipedia.org/wiki/Mortgage_insurance https://en.wikipedia.org/wiki/Mortgage_insurance
- mbostock 12y ago
  We’re not currently including mortgage insurance, no. You could approximate it by increasing the mortgage rate, but the tax treatment of mortgage insurance payments may be different and so that may not be accurate. Perhaps this is something we can add in the next iteration of the calculator. The interaction between down payment rate and mortgage insurance rate also reveals a limitation of our user interface: On the one hand, it’s nice to have all the variables decoupled so that you can set and explore them independently. On the other hand, many of the variables are not independent. If you change one variable, you may need to change other variables to maintain a realistic scenario. Having the mortgage insurance rate tightly coupled to the down payment would probably be too limiting, but maybe there’s a still a way to better identify when certain variables (or combination of variables) are unrealistic.
  - pessimizer 12y ago
    Maybe instead of just having reasonable defaults, you could include reasonable ranges through a background gradient on each graph (darker for more common, lighter for less common)? With that, you could manipulate the reasonable ranges through interactions between graphs, while still allowing people to set the actual number anywhere they pleased. Also: big fan. Thanks for d3.
    - mbostock 12y ago
      Definitely. We actually designed something like that, but due to time constraints weren’t able to ship it (yet). One complication is that a reasonable range for a given variable can depend on other variables. But hopefully we’ll figure it out. And thank you!
woobar 12y ago
Why are Utilities listed under the category labeled as "surprising variety of expenses that renters do not directly pay"? Edit: I see it is just a poor labeling, explanation mentions just the portion of utilities that not covered by landlord.
fspeech 12y ago
One risk associated with owning that doesn't often get mentioned but that is more relevant these days is your exposure to misgovernance of your local governments. There were a few scares in the municipal bonds markets in recent years but home buyers should recognize that they are exposed to similar risks. After all it is the taxes they pay that will be needed to pay back the municipal debt. If a city were to get into fiscal troubles police and other public services would get cut first potentially impacting property values, maybe greatly in which case there could be a downward spiral.
- Spooky23 12y ago
  Unless you're somehow securing multi-year leases, that's a cost that is passing on to you as well. You also need to factor in the value of negative impacts of renting. When you have kids, school selection is driven by location -- and a lease is more ephemeral than a mortgage. You also always need to deal with landlords, who can be good or bad, and often cannot make changes to the property that you would like.
  - deleted 12y ago
    [deleted]
  - cstejerean 12y ago
    You don't need multi year leases. If anything that would be bad. If I rent and the city I am in goes bankrupt and has to cut public services which in turn affect my quality of life and local property values, I can pick up and move and let the owner of the property deal with the double digit hit on his property value. Meanwhile I can move in to the town next door that doesn't have those problems. The costs are not passed down to me.
    - Spooky23 12y ago
      That's fine when you're 23. When you have a couple of kids, and chasing the lowest taxes/rents means that you're uprooting them from school and friends, there is a high cost for that. Ever get to know a military brat? It's a hard life.
dzohrob 12y ago
This is super-helpful, thanks for posting! One quick suggestion: it would be great to be able to save the numbers you've punched in so you can share a URL with someone (e.g., spouse, parents) next time the rent v. buy discussion comes up.
silverlake 12y ago
Your home price maxes out at $3M. That's just a small apartment in Manhattan.
- judk 12y ago
  Well, Central Park West maybe. You can get a nice small (Manhattan small -- a near-minimal studio) apartment for about $0.5M
philfreo 12y ago
Very well done! I noticed that one of the biggest factors, unsurprisingly, is Home Price Growth Rate and rent price growth rates. Do you have any sources for the rates historically? Preferably by location.
- RobinL 12y ago
  Great visualisation and nice to see it properly accounts for all considations. I live in London. Unfortunately, as the calculator shows, change in house prices is overwhelmingly the most important consideration in buying if you're thinking of staying for much more than 2-3 years. Admittedly growth is completely unpredictable, (and also highly inequitable), but to a large extent a decision to buy is based on expected future house prices. For instance, I have a friend who bought three years ago - a £250k flat which would cost around £1,300 to rent. According to Rightmove and Zoopla (and the price a similar flat next door sold for recently), the monthly gain in value has been around £3,000 (!!). I also note this gain is tax free, so equates to earning more like £5,000 a month pre tax. Unfortunately these gains are only available to those who earn enough and save enough for a deposit, or more commonly, those who receive parental assistance in purchasing property.
eloisant 12y ago
How do you take into account the initial fees? (Taxes, real estate agent fees). It would be nice to have that configurable. It's important to have it separate from the price you pay to the owner because you shouldn't include them in the resell value of the house.
toyg 12y ago
Great work! Any chance that you could publish a tax-neutral version, which could be used internationally?
DrPhish 12y ago
Suggestion: When the down-payment slider goes over 50% suggest that, depending on income level and interest rates, it may make sense to buy the house on a line of credit _backed by the house itself_. I did this, and it saved me a ludicrous amount of money vs. a mortgage
- sbd 12y ago
  How are you then able to get a mortgage if the house is already collateral on another loan?
  - DrPhish 12y ago
    You don't need a mortgage in this scenario, that's the beauty. You leverage the value of the house itself to purchase the house, all made possible by the size of the down payment. This way, you just deposit all your available funds and income into the line of credit. It's also more flexible than a mortgage in that your can both pay off as much as you want, with the ability to borrow back against it again with no penalties. This allows you to put all liquid assets against the loan with the ability to get them back out again in an emergency. I was also able to negotiate prime on mine, so the interest was very low. I did this twice, and was able to pay off the debt within 3 years each time, single income, making less than $60k/year. By starting with a modest house, you can leapfrog up to a high-value property in a short timeframe and a minimum of interest payments
pilom 12y ago
The format of the old version [1] is so much better. The independent variable is how long I need to live in my house to break even, not how cheap do I need to find a place to rent. [1] http://www.nytimes.com/interactive/business/buy-rent-calculator.Html http://www.nytimes.com/interactive/business/buy-rent-calcula...
- smrtinsert 12y ago
  This actually was more helpful, thank you.
- mbostock 12y ago
  If you all you care about is being cheaper than a given rent $X, then just look at the How Long Do You Plan to Stay? chart. When the equivalent rent drops below $X, then you’ve “broken even”. (That’s in terms of buying being cheaper than renting; if you meant making an actual profit on your home, then the equivalent rent has to drop below $0. This typically only happens when the home price growth rate is high.) But how long you stay is far from the only independent variable. The intent of the new calculator is not just to provide a single, definitive answer — which is essentially impossible given the fundamental uncertainty in predicting the future — but to demonstrate how the variables interact with each other and give you a feel for the space of possibilities. There are many other considerations besides timing.
geebee 12y ago
I found this fascinating, and fun to play with. My own academic background is in industrial engineering, and a big part of my career has been creating analytical tools (as software) for planners. So this sort of thing is right up my alley. Here's the problem I often run into - how valuable is this, really, compared to a good and much simpler heuristic. For instance - how well would this compare to a rule of "buy if you plan to be in the house more than [five/seven/ten] years?" One story they like to tell in operations research classes is about a couple of programmers discussing the implications of rounding when an input (viscosity) had been estimated by a field worker rubbing mud between his fingers and typing something in... Another factor is that, in my "adult" life (adult being where I made enough money to squeak into the housing market if I so chose), housing has fluctuated wildly. I finished grad school in about 2000. Since then, housing has made a mocker of pretty much every financial decision I've made. The amount I saved was generally eclipsed by the amount San Francisco housing values increased between 2000 and 2007, dropped between 2007 and 2012, rocketed up again since then. In spite of all that, I think that this is a very worthy tool, especially if it helps people really understand the factors that go into a decision. But considering how unpredictable everything is... do you think it really adds much as a true planning tool, beyond a vastly simpler heuristic?

krschultz 12y ago

This is a really awesome tool, and as someone in NYC currently debating renting vs buying it is very useful. I used to pass around the old NYTimes Rent V Buyer calculator often when people started thinking about the topic, I definitely will send this one out instead.

NoMoreNicksLeft 12y ago

> Of course, there’s still a big intangible difference between having debt and not having debt, Both renters and owners need a place to live in the future, assuming they're not dead. If we exclude those who live with mommy and daddy or mooch off of other people... Well, then whether the debt is formal with a mortgage or not makes little difference. Even renters are on the hook to come up with $1000 for the month of October 2016. It's just not in writing.

deleted 12y ago
[deleted]
fspeech 12y ago
The main problem with owning is illiquidity and associated immobility. If you rent you can quickly down shift if you run into trouble. If you own the transaction cost is much higher if you need to move. The main advantage of owning one's own residence is tax and stability (the flip side of the illiquidity problem). Owner's equivalent rent is not a taxable income. Capital appreciation works in your favor rather than against you when you rent. In short owning one's own home is both economically and psychologically rewarding if you have long term stable income.
- NoMoreNicksLeft 12y ago
  > The main problem with owning is illiquidity and associated immobility. If you rent you can quickly down shift if you run into trouble. Where are you getting these lease-free rental units? True, you're less on the hook with a 12 month lease, and the liability is lower than a 30 year mortgage... But this is a very mild difference. That job's not going to wait for you to sell your house or for your lease to end. > If you own the transaction cost is much higher if you need to move. If you own, then eventually you're not paying anything at all for a place to live. And don't bother to mention property tax... you're paying that if you rent, too, it's just hidden. This is a manufactured debate, it's meant to appeal to twentysomethings' bohemian aspirations. Someone wants them mobile so they can herd them around like migrant workers.
  - sheepmullet 12y ago
    Breaking lease is far simpler and cheaper than selling. It's never taken me more than 2-3 weeks to find someone to take over the lease whereas it can take months to sell a house. Because of this ease whenever I move jobs I always move house to be closer to work (after passing probation) because in my area changing jobs can easily add an hour a day to your commute.
    - 12y ago

dmnd 12y ago

I've been using the old version of this for a few months. Making it obvious to which parameters the result is most sensitive is a huge improvement, thank you and well done!

mbostock 12y ago
Thanks, that’s good to hear. There’s always a risk releasing a new version of a popular tool. For those that still want to use the old one I think we’ll find a new home for it, too.
- ernestipark 12y ago
  I really do like this new version as it seems easier to answer the main question at hand. I did like some aspects of the older one though (all #s more easily digestible, the big graph) so seeing it in a new home would be nice.

hkmurakami 12y ago

Huge props for including things like the Marginal Tax rate for tax deduction and closing costs, which most of my peers that I've spoken to are unaware of or fail to take into consideration properly. I just recently had a conversation with a friend about renting vs buying, and I raced through many of the factors in this calculator to demonstrate that it's not such a simple question and that there are many factors that depend on one's financial (and other) situation, but it totally went over her head bc I was going way too fast. I'll definitely use this page when explaining things to my friends in the future. Thanks so much :)

mahyarm 12y ago
Wow, the marginal tax rate pretty much cut the rental limit in half, the difference is that big.
- leishulang 12y ago
  why higher marginal tax rate makes buying better? I don't get it.
  - dragonwriter 12y ago
    Higher marginal tax rates increases the $ value of mortgage interest deduction for the same amount of mortgage interest payment (since a deduction reduces taxable income, but the amount of reduction in actual tax liability is the reduction in taxable income times the marginal tax rate.)
    - leishulang 12y ago
      I see, but most mortgage doesn't have interest income tax deduction here in Canada? edit: Just check interweb, only mortgage that being used to invest for more incomes are eligible for tax reduction in Canada, thus more trouble to convert a house mortgage to investment mortgage.
kenrikm 12y ago
I used it to calculate if buying my house was a better deal than renting. Turns out over 30 years it was exactly the same.. down to the dollar.

jliptzin 12y ago

Really valuable stuff here. Thanks. One small addition I'd consider adding is estimated rental income if you buy and plan to rent out a portion of the property. I am in the process of buying a home right now and plan to do just that, but this factor seems to be missing from the chart.

mbostock 12y ago
Thanks, that’s a good suggestion. There are additional tax considerations with second homes (and business properties), but it’d be nice to include these in the model.

arjunnarayan 12y ago

Do you have a link to Felix Salmon pointing out that this demonstrates Modigliani-Miller? Edit: Thanks!

mbostock 12y ago
https://twitter.com/felixsalmon/status/469311904582627329 https://twitter.com/felixsalmon/status/469311904582627329
- arjunnarayan 12y ago
  But it looks like Down Payment doesn't affect the result conditioned on holding the Mortgage Rate constant. I'm not so sure that's a good assumption. I imagine the down payment strongly affects the mortgage rate you'd get.
  - judk 12y ago
    The M-M theorem is one of those pretty void theorems that says "in the absence of all real world factors, two abstsct models are mathematically equivalent structures".

kpommerenke 12y ago

According to the Modigliani–Miller theorem, the mix of debt (size of mortgage) and equity (down payment) is only irrelevant in a world without taxes. However, mortgage interest is tax deductible, while rent is not, so their result doesn't apply here. The flat down payment chart is a coincidence, based on the default values for interest and inflation rates, growth rates and expected returns.

mbostock 12y ago
I don’t think it’s a coincidence — those default values reflect the current market, and it’s a reflection of the market being fairly efficient. For example, if investment return rates were consistently higher, you could expect mortgage rates to rise as well. Taxes introduce some inefficiency, but I think the broader point still holds.

deleted 12y ago

[deleted]

pessimizer 12y ago

Your mentioning of this made me check out the graphs again - and I noticed that the graph depicting the size of a down payment was flat. That could only mean one thing: the cost of mortgage insurance (that you will be forced to get if your down payment is lower than 20%) hasn't been included. That's a major cost on low down-payment house purchases. Intentional or oversight? https://en.wikipedia.org/wiki/Mortgage_insurance https://en.wikipedia.org/wiki/Mortgage_insurance

mbostock 12y ago
We’re not currently including mortgage insurance, no. You could approximate it by increasing the mortgage rate, but the tax treatment of mortgage insurance payments may be different and so that may not be accurate. Perhaps this is something we can add in the next iteration of the calculator. The interaction between down payment rate and mortgage insurance rate also reveals a limitation of our user interface: On the one hand, it’s nice to have all the variables decoupled so that you can set and explore them independently. On the other hand, many of the variables are not independent. If you change one variable, you may need to change other variables to maintain a realistic scenario. Having the mortgage insurance rate tightly coupled to the down payment would probably be too limiting, but maybe there’s a still a way to better identify when certain variables (or combination of variables) are unrealistic.
- pessimizer 12y ago
  Maybe instead of just having reasonable defaults, you could include reasonable ranges through a background gradient on each graph (darker for more common, lighter for less common)? With that, you could manipulate the reasonable ranges through interactions between graphs, while still allowing people to set the actual number anywhere they pleased. Also: big fan. Thanks for d3.
  - mbostock 12y ago
    Definitely. We actually designed something like that, but due to time constraints weren’t able to ship it (yet). One complication is that a reasonable range for a given variable can depend on other variables. But hopefully we’ll figure it out. And thank you!

woobar 12y ago

Why are Utilities listed under the category labeled as "surprising variety of expenses that renters do not directly pay"? Edit: I see it is just a poor labeling, explanation mentions just the portion of utilities that not covered by landlord.

fspeech 12y ago

One risk associated with owning that doesn't often get mentioned but that is more relevant these days is your exposure to misgovernance of your local governments. There were a few scares in the municipal bonds markets in recent years but home buyers should recognize that they are exposed to similar risks. After all it is the taxes they pay that will be needed to pay back the municipal debt. If a city were to get into fiscal troubles police and other public services would get cut first potentially impacting property values, maybe greatly in which case there could be a downward spiral.

Spooky23 12y ago
Unless you're somehow securing multi-year leases, that's a cost that is passing on to you as well. You also need to factor in the value of negative impacts of renting. When you have kids, school selection is driven by location -- and a lease is more ephemeral than a mortgage. You also always need to deal with landlords, who can be good or bad, and often cannot make changes to the property that you would like.
- deleted 12y ago
  [deleted]
- cstejerean 12y ago
  You don't need multi year leases. If anything that would be bad. If I rent and the city I am in goes bankrupt and has to cut public services which in turn affect my quality of life and local property values, I can pick up and move and let the owner of the property deal with the double digit hit on his property value. Meanwhile I can move in to the town next door that doesn't have those problems. The costs are not passed down to me.
  - Spooky23 12y ago
    That's fine when you're 23. When you have a couple of kids, and chasing the lowest taxes/rents means that you're uprooting them from school and friends, there is a high cost for that. Ever get to know a military brat? It's a hard life.

dzohrob 12y ago

This is super-helpful, thanks for posting! One quick suggestion: it would be great to be able to save the numbers you've punched in so you can share a URL with someone (e.g., spouse, parents) next time the rent v. buy discussion comes up.

silverlake 12y ago

Your home price maxes out at $3M. That's just a small apartment in Manhattan.

judk 12y ago
Well, Central Park West maybe. You can get a nice small (Manhattan small -- a near-minimal studio) apartment for about $0.5M

philfreo 12y ago

Very well done! I noticed that one of the biggest factors, unsurprisingly, is Home Price Growth Rate and rent price growth rates. Do you have any sources for the rates historically? Preferably by location.

RobinL 12y ago
Great visualisation and nice to see it properly accounts for all considations. I live in London. Unfortunately, as the calculator shows, change in house prices is overwhelmingly the most important consideration in buying if you're thinking of staying for much more than 2-3 years. Admittedly growth is completely unpredictable, (and also highly inequitable), but to a large extent a decision to buy is based on expected future house prices. For instance, I have a friend who bought three years ago - a £250k flat which would cost around £1,300 to rent. According to Rightmove and Zoopla (and the price a similar flat next door sold for recently), the monthly gain in value has been around £3,000 (!!). I also note this gain is tax free, so equates to earning more like £5,000 a month pre tax. Unfortunately these gains are only available to those who earn enough and save enough for a deposit, or more commonly, those who receive parental assistance in purchasing property.

eloisant 12y ago

How do you take into account the initial fees? (Taxes, real estate agent fees). It would be nice to have that configurable. It's important to have it separate from the price you pay to the owner because you shouldn't include them in the resell value of the house.

toyg 12y ago

Great work! Any chance that you could publish a tax-neutral version, which could be used internationally?

DrPhish 12y ago

Suggestion: When the down-payment slider goes over 50% suggest that, depending on income level and interest rates, it may make sense to buy the house on a line of credit _backed by the house itself_. I did this, and it saved me a ludicrous amount of money vs. a mortgage

sbd 12y ago
How are you then able to get a mortgage if the house is already collateral on another loan?
- DrPhish 12y ago
  You don't need a mortgage in this scenario, that's the beauty. You leverage the value of the house itself to purchase the house, all made possible by the size of the down payment. This way, you just deposit all your available funds and income into the line of credit. It's also more flexible than a mortgage in that your can both pay off as much as you want, with the ability to borrow back against it again with no penalties. This allows you to put all liquid assets against the loan with the ability to get them back out again in an emergency. I was also able to negotiate prime on mine, so the interest was very low. I did this twice, and was able to pay off the debt within 3 years each time, single income, making less than $60k/year. By starting with a modest house, you can leapfrog up to a high-value property in a short timeframe and a minimum of interest payments

pilom 12y ago

The format of the old version [1] is so much better. The independent variable is how long I need to live in my house to break even, not how cheap do I need to find a place to rent. [1] http://www.nytimes.com/interactive/business/buy-rent-calculator.Html http://www.nytimes.com/interactive/business/buy-rent-calcula...

smrtinsert 12y ago
This actually was more helpful, thank you.
mbostock 12y ago
If you all you care about is being cheaper than a given rent $X, then just look at the How Long Do You Plan to Stay? chart. When the equivalent rent drops below $X, then you’ve “broken even”. (That’s in terms of buying being cheaper than renting; if you meant making an actual profit on your home, then the equivalent rent has to drop below $0. This typically only happens when the home price growth rate is high.) But how long you stay is far from the only independent variable. The intent of the new calculator is not just to provide a single, definitive answer — which is essentially impossible given the fundamental uncertainty in predicting the future — but to demonstrate how the variables interact with each other and give you a feel for the space of possibilities. There are many other considerations besides timing.

geebee 12y ago

I found this fascinating, and fun to play with. My own academic background is in industrial engineering, and a big part of my career has been creating analytical tools (as software) for planners. So this sort of thing is right up my alley. Here's the problem I often run into - how valuable is this, really, compared to a good and much simpler heuristic. For instance - how well would this compare to a rule of "buy if you plan to be in the house more than [five/seven/ten] years?" One story they like to tell in operations research classes is about a couple of programmers discussing the implications of rounding when an input (viscosity) had been estimated by a field worker rubbing mud between his fingers and typing something in... Another factor is that, in my "adult" life (adult being where I made enough money to squeak into the housing market if I so chose), housing has fluctuated wildly. I finished grad school in about 2000. Since then, housing has made a mocker of pretty much every financial decision I've made. The amount I saved was generally eclipsed by the amount San Francisco housing values increased between 2000 and 2007, dropped between 2007 and 2012, rocketed up again since then. In spite of all that, I think that this is a very worthy tool, especially if it helps people really understand the factors that go into a decision. But considering how unpredictable everything is... do you think it really adds much as a true planning tool, beyond a vastly simpler heuristic?