This model doesn't seem to consider risk. If you finance 75% of your home value, your equity is 4x as volatile as the market.
Is it better to buy or rent?
31–40 of 105 posts
Re: Is it better to buy or rent?
#32The money is certainly important. But buying is better than renting in many ways. Want to rip out your kitchen and have a new one? Want to pave part of the garden? Want to move a wall? Want to paint it all, or fit blinds? If you own it you can do all that. If you rent you have to ask permission which you might not get. Plus why spend money on somewhere you don't own?
It's a trade off. I live in London, UK in a flat I rent for £950 pcm. This would cost me £379,000 to buy, at the very least as it's a relatively nice area. I could scrape the deposit and get a £379,000 mortgage but the insurance, maintenance and other costs on top would result in zero disposable income. Currently I have £1750 left over every month which is nothing but bags of freedom to do whatever I want. If I was t…
Phenomenal comment. Hopefully people read this and contemplate it. I've gone through an intense period of my life with respect to life and death, and a couple of years ago I only thought about "doing the right thing", now I ensure I enjoy each day I have, because nothing is promised and possessions are ultimately useless.
Re: Is it better to buy or rent?
#33One factor that's never discussed is the availability of rental inventory. In some cities it's very hard to find a single family home (instead of an apartment) for rent - hence buying becomes the only path to getting the type of home you want.
Re: Is it better to buy or rent?
#34Earlier quoted context omitted.
> Buying instead of renting forces you to live more frugal As a home owner, I'm going to ask someone to elucidate on this sentiment.
Here is my take.... 1. People think they can afford to buy a place at $X 2. People find a place at $X+Y and say "it'll be tough, but I love this place" 3. People find out actually owning a house costs $X+$Y+$Z and they can barely make their house payments and supporting costs 4. Eventually (after enough mortgage payments) your principal payments become large enough to take on the form of "forced savings" I think this…
This is just nuts.
Re: Is it better to buy or rent?
#35There is an important oversimplification that these formulas/programs/spreadsheets often make, and I see it happening here. Consider two alternatives where everything is the same except the amount of money used for the mortgage down payment. The formula assume that money not used for the down payment is invested at a certain rate of return. If the mortgage interest rate is greater than the investment return, then the…
There is risk in the mortgage as well though. The value of the house could drop.
Re: Is it better to buy or rent?
#36So I pretended that "$" meant "£", and entered some plausible UK figures, including recent house price growth of 8% and rental growth of 10%, and it told me I should buy unless I could rent for -£391 a month.
Taking out a mortgage is clearly the best investment I ever made.
Re: Is it better to buy or rent?
#37Any github link to the actual visualisation would be handy .. looks like crossfilter types http://square.github.io/crossfilter/
Re: Is it better to buy or rent?
#38Very nice calculator. It is missing a PMI option for loans with a downpayment under 20%. That is a significant expense.
Re: Is it better to buy or rent?
#39Earlier quoted context omitted.
Want to live somewhere else without making a life-altering financial transaction that could lower your net worth tens of thousands of dollars?
Property will always increase over the long term. Unless you're moving every 6 months this isn't a good reason. Of course selling your house and buying a new one will take a few months, so it does restrict your mobility in that way.
Maybe on the whole but your personal investment is highly centralized and is in no way guaranteed to go up over any period of time.
Re: Is it better to buy or rent?
#40Does this take into account the risk of a housing market crash? For me, the biggest reason for renting rather than buying is to avoid putting all my bags in one basket; I wouldn't buy $500k worth of shares of one company, so spending $500k on a single house seems similarly risky.
You're looking at it the exact right way. Risk is a two sided-coin. If the local housing market does well, you can make out like a bandit. If it doesn't, you can lose a lot of money. No different than owning $500K worth of share in a public company. Nothing wrong with buying a house, but people should be careful not to have their net worth all tied up in a single asset (house or not). The one rule I've heard is 90 mi…
> When you're young is OK to have a high percentage of your net worth in a house, but not when you're getting close to retirement.
That said, if you actually own your home in retirement you've significantly mitigated against the risk of getting priced out by rising rents if the regional economy heats up. That could be a problem on a fixed income.