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.<p>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:<p><a href="http://en.wikipedia.org/wiki/Modigliani–Miller_theorem" rel="nofollow">http://en.wikipedia.org/wiki/Modigliani–Miller_theorem</a><p>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.<p>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.<p>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.
This calculator ignores the fact that the market for real estate buyers is increasingly global but the rental market is local.<p>If you are in your 20's and grew up in a middle class family in Vancouver, Toronto, Sydney, Melbourne or Auckland, and have a middle class job, it is virtually impossible for you to be able to afford to buy a house in the city in which you grew up. E.g., here's a New Yorker article on the impact of the global property market in Vancouver: <a href="http://www.newyorker.com/talk/financial/2014/05/26/140526ta_talk_surowiecki" rel="nofollow">http://www.newyorker.com/talk/financial/2014/05/26/140526ta_...</a>.<p>The political fallout from the intergenerational inequality over property ownership in Canada, Australia and NZ is going to be very interesting to watch...
I said this when such a thread came up the last time: If you can (easily) switch jobs without moving it might make sense to buy. If you can't, however, renting is the safer option as you can move if/when there is a problem with the job. Domiciles can be rather illiquid at times, which sucks when you need to move for work.<p>It's a separate question if it's worthwhile to buy at all, as that's dependent on geography, present and future market trends, lifestyle choices, ...
My wife and I found a great apartment to rent. It was spacious, quiet location, reasonable rent. We were happy for a few years.<p>Then the owners sold the complex, and the new owners set out to remodel everything, very much against our wishes. Construction crews started entering our apartment. They came in while we were out, laying down plastic sheets and moving our furniture around. They sometimes came in while I was sleeping, and while I was getting dressed. It was humiliating: I felt stripped of my privacy and dignity.<p>Buying allows you to control your property, but more significant to me is what renters must endure: arbitrary changes to their home, allowing unfamiliar men to enter their homes uninvited, etc. As a homeowner, <i>nobody</i> enters my home uninvited, unless they have a search warrant!
Buying a home is not an investment, it's a quality of life improvement. Something that I usually don't see mentioned in rent-vs-buy arguments is that the housing stock that's available for sale can be very different from what's available on the rental market. The two markets are similar only at the low end. If you want something nicer, the chance that you are going to find exactly what you want is very slim. Even "luxury" apartments for example typically have beige carpet, cheap appliances, cheap bathroom fixtures, etc. For a private landlord it doesn't make sense to upgrade the property above the bare minimum either. It's just not cost effective. And if you are looking to rent a single family house your choice will be even more limited. Now, if you buy your home, with some reasonably priced improvements you can improve your level of comfort significantly. Of course, not everybody cares about these things. If you don't care too much about where you live then renting makes perfect sense.
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 will tell you my reason to own a home, large at that, even though I am single. I have seen friends/coworkers have to move after leases were not renewed. I have seen friends/coworkers lose put up with stuff about their rentals I would not tolerate as an owner. Sure it go fixed, but damn. I have also seen them held hostage to rising rents just to renew.<p>Yeah it can be more expensive at times, more work definitely, but I never have to worry about someone else deciding they don't want me living here.
Doesn't have the fancy d3 visualization, but here's a better analysis over the long run (30 years). It even stacks the deck against owning at the start by assuming 100% financing. There's a few missing components (mortgage insurance etc.) but even if you add those numbers into this rather detailed analysis, the conclusion doesn't change. It's actually a good enough analysis that you can just added or subtract a few other scenarios from it yourself and until you're describing some very bizarre circumstances, the basic conclusion holds. All the calculations and reasoning are provided here. Buying is unambiguously a better use of your money over the long term. It's not even close.<p><a href="http://assayviaessay.blogspot.com/2014/04/rent-or-buy.html" rel="nofollow">http://assayviaessay.blogspot.com/2014/04/rent-or-buy.html</a><p>Lots of people here describe renting as having an upside because you can remain location mobile, but that's true of owning as well. The only option at that point isn't to sell your home and then buy one somewhere else, you can also rent out your current home, and buy a second one. You can continue doing that ad nauseum, except now you've convinced other people to pay for your mortgage instead of you. In the end you'll own a few properties and all the people who rented from you will own nothing.<p>Something mentioned in my link but not explicitly in the OP, rent goes up, mortgage payments stay the same or can go down. Over 30 years, your housing burden goes down significantly providing you with increased monthly liquidity.<p>At the end of the day, you own the property at the end and for all years >30 you effectively live for "free" (minus taxes).<p>I urge everybody reading the OP to take a few spare hours and run the numbers themselves and see if the easy conclusion here holds out for them.
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).
The problem with this (admittedly very good) calculator is there are two key knobs that require massive amounts of speculation but have a huge impact on the decision: projected return on investment and expected home price growth. Good luck predicting either of these over the next 10 years.
I resisted buying for a long time for mostly flexibility reasons. Eventually, with a 2.85% 15 year rate and a roughly 2.5% home price growth rate it was just stupid not to buy.<p>This is a great tool. I would have to find a rental for nearly half (60%) the going rate in order for renting to make sense in my area.
My uncle bought his house and pays $300/month in a neighbourhood where rent is $1,500/month on a similar home. He is near the end of a 30-year loan, and will retire soon, paying just property taxes and upkeep. Keeping the long-term in mind, it seems better to buy.
Two important adjustments when using this:<p>"Investment return rate" -- Only 4%? An index fund will return higher than that.<p>"Monthly common fees" -- Required if you are considering buying a condo. This changes the per month rent comparison dollar-for-dollar.
The calculator is surprisingly accurate based on some math I did late last year when thinking about buying a house.<p>A small (1300 sq ft) house in SF can be bought for $750K in some neighborhoods in the south of the city. The ones in between the fancy ones and the crappy ones.<p>I did a pretty detailed analysis of what everything would cost. Loss of investment income on the down payment, insurance, property taxes, etc. And came out to around $4100.<p>You can rent the same house in SF for around $3750/month, so unless you're assuming a pretty spectacular rise in home values, it doesn't make sense to purchase.
I'd personally find this more useful if I could start with what I'm paying for rent and get a result of "If you can buy a similar home for less than $xxx,xxx then buying is better."
Rent or buy arguments universally skip what I consider the most important factor in any major investment decision: freedom. When you buy a house, you tie up major assets and take on a huge debt load. This provides a massive constraint on your life. You're less likely to take on a risky job opportunity, you're less likely to move for a good opportunity, you're less likely to purchase other things you enjoy, and you put all your eggs in one basket. On the last point, as Americans should know now, real estate is not a sure holder of value. You can easily lose 50-100K if you need to sell your house to move somewhere else but there are no buyers. The flipside of this is you may sell it for the asking price but need to wait a year to do so.
When interest rates are low, prices are high, and when rates are high, prices are low. It's fairly straight-forward. Your payment works out about the same. You should buy when rates are high and prices are low because you can renegotiate the rate later. You can't renegotiate the price.<p>Rates are still pretty low now, and thus I continue to rent.
Don't forget the human factor! Though theory says buying a house is not always the best financial move, on average those people are better of when they're old, because they are forced to live more frugal.<p>People that rent an apartment or house usually don't have the discipline to live as frugal as buyers are forced to be.
The New York Times has had this same calculator for years with all the same options and a much better interface: <a href="http://www.nytimes.com/interactive/business/buy-rent-calculator.Html" rel="nofollow">http://www.nytimes.com/interactive/business/buy-rent-calcula...</a><p>Why did they make it worse?
Really neat that you've updated this. One issue: The graphs of grey bars on white background have very little contrast even in different browsers on a nice monitor. The old version of the calculator has much more color contrast between the graphs and background and doesn't have this issue.
This analysis always misses the most important by far for non-yuppies: the housing mix for renting vs owning is very different. In my neighborhood, you can't rent a house, because everything is owner occupied.<p>Rent vs Own is a boring question. Rent This vs Own That is nearly impossible to quantify.
This version is better:<p><a href="http://www.nytimes.com/interactive/business/buy-rent-calculator.html?_r=0" rel="nofollow">http://www.nytimes.com/interactive/business/buy-rent-calcula...</a>
zappo had a list of uk cities comparing rent prices with interest only mortgage price. Some cities eg. Edinburgh showed hardly any difference (for comparable sized properties).<p>What I'm not sure about though is how it compares to a traditional principal and interest mortgage. Obviously your interest payments fall as the mortgage amortises... So then how does total interest compare to money spent on rent in that case? That's what most people would be wondering when it comes to evaluating renting vs buying...
Has anyone compared this to the Trulia buy versus rent calculator? <a href="http://www.trulia.com/rent_vs_buy/" rel="nofollow">http://www.trulia.com/rent_vs_buy/</a>