Tech Maven

here is one slick tool: http://www.nytimes.com/2007/04/10/bu...et&oref=slogin

Edit: if it won't let you in, get a login/pass combo from www.bugmenot.com.

mcartier713

i don't get it... i always thought it was better to buy, regardless.

when you rent, all you get is a receipt.

i mean yeah, if you're paying $800/mo rent vs. $1000/mo mortgage, you'd be saving money in the short run... but then you can turn back around and sell the house? seems like a no brainer to me.

Cubdriver

Despite having an excellent credit rating I still rent. For a single person or a couple that does not need a house it makes more sense to rent than to pay to heat, finance, insure, etc. so much extra space. I thought equity in a home was highly desirable at one time also, but to get access to it you have to pay a bunch of costs and charges that go along with the mortage and it is not surprising this estimator tells you to rent if you don't really need the extra space. Banks are not in the lending business to do anyone a favor, they plan to make money off your mortgage and risk almost nothing. I presently rent a newer duplex at around 900 sq. feet, which is fine for me and what I need. I have a heated garage, private drive, etc. and there's no need for another thousand square feet. When I get older I may build a house, but that will be years down the road.

The best reasons I have found in favor of getting a mortgage are (in my view) 1) need the space of a house over what's available in typical apartments, due to expanding family 2) can pay cash and do not require a mortgage in the first place 3) have job security or a well-paid housemate to make payments for you if there is a job loss. I have also seen an area or two of the country where there were not enough rental dwellings of sufficient quality. If none of these applies then renting probably is a better option. Take the money you save and invest.

mcartier713

but all that is assuming you'd never move/sell the house.

if you live (i'm using tech's calculator thing for this) somewhere for say, 7 years, and you're paying either $1000/month rent or you buy someplace for $200k (cash, mortgage, whatever) - over the 7 years you've spent $108,000 to rent this place, to which all you get is a receipt. however, if you buy the house, ($126,000 to this point), you've accumulated all that equity that you can get back through selling the house. THAT'S A LOT OF MONEY.

or is my example too far fetched and i have no idea what i'm talking about?

FlyerJosh

I didn't read the article, but I do know that if I had cut a lot of "non-essential" spending right out of college and bought a crappy 2 or 3 bedroom townhome in 2000 for about 120K, then rented a room or two to other pilots, I could have sold in 2005 with about 200K in equity and paid cash for my current home in Roanoke.

Over those same 5 years, my roommates and I paid over 96,000 rent for an apartment just north of Dulles Airport.

JMT21

If the calculator spits out 7 years, its saying that if you are planning on living in that particular location for less than 7 years, you would be better off renting than buying a home. If you are planning on living their for more than 7 years, you are better off buying a home rather than renting.

I'm not sure what it takes into account, but the expenses in buying and/or selling a home add up quickly. I would assume that the calculator is also making the calculation thinking that, if renting, the difference between the monthly mortgage payment and rent payment is being invested.

I understand what your saying though. I had always been told that the renting vs. buying rule of thumb is 2-3 years. I suppose if rent is pretty cheap and houses are expensive, the financing unfavorable, or they are appreciating slowly, it might make sense to rent for longer than that.

HSLD

Markets go up, Markets go down. There is a glut of properties in the US and I don't think it's going to return to the double-digit equity gains we've seen since the dot com bust anytime soon.

Real Estate may not be the investment it was, but there are few things that the calculators didn't account for and that was a tax write-off for interest. Depending on the loan product, the result could significantly skew the results of that graph.

lzakplt

The federal tax write off for mortgage interest is a big deal. I read in Forbes several years ago that the best investment anyone without a home can make is a home, primarily for the tax savings. These days the AMT is taking a bite out of that tax savings for some, I think.

LJ-ABX

The tax savings amounts to you spending $1.00 in mortgage interest to save 25¢ in taxes. Send me $1.00 and I'll pay 50¢ of your taxes for you. Much better deal.

Cubdriver

It boils down to the particulars of each person. You can't say one option is always best without looking a bunch of variables which vary for each one of us. Being 40 and having done nothing but rent all this time I was surprised and disappointed when I learned that it was not in my best interest to buy a house. I even had a 20% down payment ready to use for it at one point, but when you consider that I typically relocate every 2.5 years, am single, have other debts to pay (school), that mortages involve insurance, interest, and home upkeep, that one can lose a house if laid off, and so forth it looks better for someone like me to rent until things settle down. My point is although renting may not be the most fun thing in the world it may be the best option.