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If you buy, you can do whatever the heck you want to with the house or your yard. That's true freedom and to some people - myself included - worth every penny.
If you buy, you can do whatever the heck you want to with the house or your yard. That's true freedom and to some people - myself included - worth every penny.
I think the NYT has redone this interactive piece like 50 times now.
Surely you jest! The previous version was four years ago (in 2010) and was implemented in Flash. Screenshot: https://twitter.com/driven_by_data/status/469498632027537408
"Investment return rate" -- Only 4%? An index fund will return higher than that.
"Monthly common fees" -- Required if you are considering buying a condo. This changes the per month rent comparison dollar-for-dollar.
For full disclosure I am a founder of the company but many of the mistakes in math / modeling made in the NYT Tool are corrected at SmartAsset. One example is the tax consequence of ownership - which because of the standard deduction is overestimated for lower value homes (<$250,000).
Well, these days thankfully, interest rates are relatively low. We paid a little under $200K for our home, and combined with the married standard deduction, the interest at first barely even pushed us into the itemize category. By next year, it won't suffice to even do that and we'll be back to the standard deduction.
The people who were telling us about how great the deduction is were people who all had the means to purchase much more expensive homes, and many of them bought in the past when interest rates were higher and the standard deduction lower. So it was true for them, and continues to be true for certain segments, but is not universally true.
Two important adjustments when using this: "Investment return rate" -- Only 4%? An index fund will return higher than that. "Monthly common fees" -- Required if you are considering buying a condo. This changes the per month rent comparison dollar-for-dollar.
http://money.cnn.com/2014/05/21/investing/stock-returns-low-...
"The Shiller price to earnings ratio was designed by Nobel Prize winning economist Robert Shiller to give investors a sense of whether stocks are cheap or expensive. It compares stock prices, as measured by the S&P 500 index, with inflation-adjusted corporate earnings over the past 10 years.
"The magic number at the moment is 25. That's the current Shiller ratio, and it indicates that stocks are on the expensive side. The long-term average, going back more than 130 years, is 16.5.
"But the current level is significant for another reason. According to research by Credit Suisse, when the ratio has been between 25 and 26 in the past, stock returns over the next five years have been just 2.7%. That's after adjusting for inflation."
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
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.
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…
If you buy, you can do whatever the heck you want to with the house or your yard. That's true freedom and to some people - myself included - worth every penny.
Not true in many, many cases. HOAs, condo boards, zoning laws, and historical societies can control homeowners pretty well.
So if I summarize, you can't do what you want with it and you need to pay your landlord.
Why are people calling this 'owning' a house?