Rent Vs Buy Values

Numbers plugged into nytimes rent vs. buy calculator

All numbers in 2008 dollars.  I examined whether home buying was actually better than renting over the past 7 years.

Home Price:  650K

How Long Will You Stay:  7 years  (actually turned out to be 7 years, 2 months)

Mortgage Details:  3.29%  (This is the average rate we paid over 7 years.  We started at 4.25 but ended at 2.65 — refinanced twice as rates fell over the duration…)

Down Payment:  20%

Mortgage Length:  30 Year (Technically we got a 10/1 ARM, then refinanced with a 7/1 on the first refi, and 5/1 on the second refi.  Still, the respective amortization schedule(s) reflects a 30 year term)

4.0 Home Price Growth Rate (650K at 4% compounded over 7 years = 855K.  We sold for 851K.)

2.5% Rent Growth Rate (a tad higher than inflation)

7.1% Investment Return Rate (This is the inflation adjusted, dividends-reinvested return of money invested in the U.S. S&P 500 in early 2008 and taken out in early 2015)

1.35% Taxes

20% Marginal Tax Rate

1.5% Closing Costs on Purchase (about 10K)

5.2% Cost to Sell (about 46K)

1.07% yearly renovation — about 7K/yr

.15% home owner fees  — about $900/yr

350 monthly utilities — heating, yard maint, yearly town dump fees, misc

2K in “additional renting costs”

 

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