Buy a home or rent? A new calculator can help
A New York Times interactive calculator helps you weigh which option is best for you.
This post comes from Krystal Steinmetz at partner site Money Talks News.
What makes the most financial sense -- buying or renting a home?
It's a huge decision, with a number of factors to consider. The New York Times said:
In the country's most expensive places, including New York, the San Francisco Bay Area and Los Angeles, buying a home again looks like a perilous investment, based on the relationship between their prices and rents or incomes. And in a longer list of areas, including Boston, Miami and Washington, prices have risen enough that buying is no longer the bargain it looked to be a few years ago.
In an effort to help prospective renters and homebuyers analyze their options, the Times created a comprehensive new buy vs. rent calculator. The calculator factors in a number of homeownership and renting costs, as well as assumptions about how investment income and home values could potentially appreciate.
When I put in the numbers for my 2006 home purchase, the calculator suggested that if I stay in my home for just 15 years, I'd need to pay less than $1,262 a month in rent to make renting the better option. I've seen the rental options in my town. There's no way that would ever happen for a comparable home.
Let's say we run a similar scenario for a median-priced ($425,000) single-family home in Seattle. Using a 4.25 percent rate on a 30-year mortgage, the monthly rent break-even point is $1,493. According to Zillow, the median rent price in Seattle is $1,781 a month.
You can run different scenarios using the Times calculator here.
What is a better financial decision -- buying or renting -- where you live?
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