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A few notes:
- "Final Cumulative Profit" is a bit confusing since this is not necessarily profit - this is how much less of a cost a house is over an apartment?
- Is there a way to factor in opportunity cost of down payment being in the market instead of tied up in the house?
House prices are not included in inflation estimates, rental prices are. That's another thing that should be considered.
There's a separate parameter to control the increase in house prices. My assumption is that houses have tended to increase faster than inflation in most markets.
It does? Random chart I found: https://www.aei.org/wp-content/uploads/2020/01/cpi2020-875x1.... It seems to be higher, but only slightly.
Why is the mortgage interest capped at 10%?
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
Earlier quoted context omitted.
this is great!! The final cashflow amount of the house graph (in the example) ends in the negative, s this accurate?
It is accurate! While the house cashflow is negative in the example, it's at least less negative than the apartment cash flow. Maybe the moral of the story is living with your parents for free is better than either option!
If you're not settled in your career to where you can comfortably take off long stretches of time during the day, you probably shouldn't buy a house. It's generally a bad idea for someone at the beginning of a career. There's so much to learn and it never ends - that's valuable time that could go to refreshing your mind or building up career capital.
There's also the matter of risk. Are you willing and able to handle replacing your air conditioner, furnace, and roof in the same year? If you rent, you call the landlord and have them replace those things. You'll be okay if you have a big savings account or you don't mind putting it on a credit card with a high credit limit. If you've been in your house for two years and you spent everything on the down payment and furniture, you might have trouble sleeping at night.
Why is the mortgage interest capped at 10%?
My wife wants to buy a house, but I'm unable to make life decisions without trying to minmax them. I wasn't satisfied with existing rent vs. buy calculators, so I decided to build my own! I'm not a developer, so I apologize if it's a little rough looking... Some things it takes into account: - The actual rate of return on your down payment and extra costs of a house - Inflation - Itemized deductions on your taxes - T…
Off the top of my head, some things I'd add to make this more useful to a wide audience:
- I don't know what I pay in state income and sales taxes. But I do know my income and my state's tax rate; income tax could be derived from that. I'm not sure how you'd estimate sales tax, though - you'd have to know how much of my spending is taxable.
- I've heard a rule of thumb that home maintenance costs are 1% of the home's value per year; maybe default to that, especially since a first-time home owner doesn't really know what those costs are. However, older houses will require more maintenance and that cost probably scales with square footage, not cost.
- you're assuming a 30-year mortgage - I'd put in the ability to change mortgage length. (Also, maybe a link to somewhere where I can find out what mortgage rates are.)
"Apartment" means rent and "House" means buying? I think that's confusing. It would be nice to auto update the graph every time something changes. It's nice that it has tips. Hi from Argentina! We have a somewhat different customs here so some fields are hard to guess. For example, I don't know if I can fill my taxes jointly. Another detail that confused me is that I didn't expect to sell the home after 14 years. It'…
