I am pondering the renting vs buying questions, and was trying to come up with a way of telling how many months it would take of owning a house before you were better off at the moment you sell than if you had been renting that whole time.
I assume that the total $$ used is equal for both renting and buying. To do this, I assume that the person takes the difference between the two, and sticks it into a savings account each month.
I basically say that when total $$ in net worth from owning the house surpasses the total $$ in net worth of renting + saving the difference the owner has done better than the renter. Up until that point, if you sold the house, you would be worse off than if you had rented the whole time.
To start, I assume the owner is so many $$ in the whole (negative net worth) from closing costs and other transaction costs. The renter starts with a zero net worth.
Each month, the owner gains the principle accrued from paying on the house. Each month, the renter gains the $$ they stuck into their savings account. The $$ that goes into savings is equal to [(Principle + interest + taxes + insurance + maintenance estimate) - Rental Rate].
If the owner does not beat the renter after the length of the loan, I assume the owner starts sticking their total amount they were paying before into a savings account.
Is this a valid way to look at it? Or am I missing something?
I am seeing that under some circumstances, it takes longer than the length of the loan for the owner to beat the renter.
I have a spreadsheet that does all these calculations for different values you enter for mortgage info, tax stuff, rental info, etc... if anyone wants it.
I assume that the total $$ used is equal for both renting and buying. To do this, I assume that the person takes the difference between the two, and sticks it into a savings account each month.
I basically say that when total $$ in net worth from owning the house surpasses the total $$ in net worth of renting + saving the difference the owner has done better than the renter. Up until that point, if you sold the house, you would be worse off than if you had rented the whole time.
To start, I assume the owner is so many $$ in the whole (negative net worth) from closing costs and other transaction costs. The renter starts with a zero net worth.
Each month, the owner gains the principle accrued from paying on the house. Each month, the renter gains the $$ they stuck into their savings account. The $$ that goes into savings is equal to [(Principle + interest + taxes + insurance + maintenance estimate) - Rental Rate].
If the owner does not beat the renter after the length of the loan, I assume the owner starts sticking their total amount they were paying before into a savings account.
Is this a valid way to look at it? Or am I missing something?
I am seeing that under some circumstances, it takes longer than the length of the loan for the owner to beat the renter.
I have a spreadsheet that does all these calculations for different values you enter for mortgage info, tax stuff, rental info, etc... if anyone wants it.
But yeah... I can see why there would be some cases that you'd want to buy, even if that chart indicates you're ahead to rent.
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