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Show HN: Should I Get a House? a better rent vs. buy calculator

shouldigetahouse.com

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Re: Show HN: Should I Get a House? a better rent vs. buy calculator

#51

Post by pestatije »

gruez wrote: post #22
alach11 wrote: post #8

Earlier quoted context omitted.

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.

>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.

That "Housing" in the chart is the housing component of inflation (rental, household furnishings, etc.)

Re: Show HN: Should I Get a House? a better rent vs. buy calculator

#52

Post by bachmeier »

seanc wrote: post #44
jbb67 wrote: post #34

Earlier quoted context omitted.

but also the reverse applies. If you want to make alterations or improvements to your house, better not rent

Yes, exactly. Or maybe you want a guarantee of being able to stay in one place for a long period of time, say to send your children to a particular school, or be close to neighbors or family.

The part about neighbors or family might be true, depending on whether they're going to stay put, but the part about the school is one of the biggest risks to buying a house. School boundaries get changed all the time. This is something I'm dealing with right now, and it could shave tens of thousands off the value of my house if it turns out wrong.

Re: Show HN: Should I Get a House? a better rent vs. buy calculator

#53

Post by jrs235 »

runako wrote: post #41

This looks great! A couple of comments: - some (large?) portion of mortgages will not allow PMI to be removed until you either a) inject cash to get to 20% equity or b) get to the time in the amortization schedule when you are scheduled to get to 20% equity. That is, if your home increases in notional value by 20%, you still have to pay PMI. So the PMI line item should probably not terminate after 3 years. - It would…

If your home value has increased you can usually ask/tell the lender you believe the value has increased enough that PMI should fall off and that you'd like/are willing to pay for an appraisal (typically a few hundred dollars). Or, if your loan is owned by Fannie/Freddie, you may not even need an appraisal if the new value/increase is within certain percent range. I know this because I spoke toy lender (a credit union) about getting an appraisal to remove PMI. Knowing the outstay loan amount was X I said of it appraises at X/.8 thenwe should be able to drop PMI. Lender called me back and said that X falls within Fannie/Freddie allowed range that an appraisal wasn't needed. This only works in a market where prices are increasing. Your mileage will vary depending on your lender.

Re: Show HN: Should I Get a House? a better rent vs. buy calculator

#54

Post by Finnucane »

kylestlb wrote: post #13
Finnucane wrote: post #7

Earlier quoted context omitted.

Probably want to allow for the possibility of rent rises over time. One thing that I think this actually shows pretty well is the notion that part of the answer depends on how long you intend to stay in a place. If you expect to move in two or three years, it's probably not worth the hassle/expense of buying. If you intend to stay 5+ years in one place, it makes more sense to buy.

This all depends on geography though. Buying in the bay area and only staying for 2.01 years could get you a pretty hefty ROR assuming you don't remodel anything, considering the supply constraints. Maybe covid & remote work will change that.

Maybe. Flipping is a risky business. Returns are not guaranteed. If you're just looking for a place to live, you should really evaluate it on that basis.

Re: Show HN: Should I Get a House? a better rent vs. buy calculator

#55

Post by alach11 »

dynm wrote: post #45

This would be better if it included a slider for what yearly investment return you would expect for assets not in a house. If I don't spend my down-payment on a house, I'll put it in the stock-market or something. Those gains are typically a huge part of the calculation when considering to rent vs. buy. I might be mistaken, but as far as I can tell that isn't reflected here.

I tried to account for that with the rate of return number in the results. You can compare rate of return to your expected returns in the stock market.

Re: Show HN: Should I Get a House? a better rent vs. buy calculator

#56

Post by hatch_q »

jartelt wrote: post #20
mandeepj wrote: post #9

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

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.

Interesting. In EU, max interest paid per annuity is 10% and 90% goes to equity.

Also property taxes seem steep in USA.

Re: Show HN: Should I Get a House? a better rent vs. buy calculator

#58

Post by mrfredward »

jartelt wrote: post #20
mandeepj wrote: post #9

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

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.

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.

Re: Show HN: Should I Get a House? a better rent vs. buy calculator

#59

Post by dynm »

alach11 wrote: post #55
dynm wrote: post #45

This would be better if it included a slider for what yearly investment return you would expect for assets not in a house. If I don't spend my down-payment on a house, I'll put it in the stock-market or something. Those gains are typically a huge part of the calculation when considering to rent vs. buy. I might be mistaken, but as far as I can tell that isn't reflected here.

I tried to account for that with the rate of return number in the results. You can compare rate of return to your expected returns in the stock market.

Oh, great, I misinterpreted that! (I thought it was the return on investment in the house, not your non-house portfolio.) A slider would still be nice. I've attempted calculations like this in the past, and I was surprised how much the choice ended up depending on the difference between the assumed investment rate vs. house rate.

Re: Show HN: Should I Get a House? a better rent vs. buy calculator

#60

Post by tiborsaas »

reidjs wrote: post #18
mandeepj wrote: post #9

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

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

How does 4 makes sense? Property can be an apartment too in downtown, in case you pictured buying a house in the suburbs.
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