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Rent or Buy? Compare Costs & Benefits
u/Monopoly · Joined Oct 2024
Leveraged growth and tax-free gains on a primary residence can make buying a smart long-term move. Enter your details to compare your Net Worth projections.
Last update Nov 2024
- Scenario 1: Buy the Home and Live In It
- Scenario 2: Keep Renting and Invest
- Which One Is Higher (%)
This chart compares your estimated Net Worth in both scenarios. While buying may seem costly upfront due to fees, property appreciation and tax advantages can make homeownership a valuable long-term investment.
Read more from author: https://docs.moneyeva.com/examples/common-use-cases/#1-rent-vs-buy-analysis
# Years from Now
Try your numbers:
Enter the total rent you currently pay per month.
à =
Provide the price of the home you’re considering buying. This is the total cost of the property before any transfer taxes or fees.
B =
Enter the amount you plan to put down as an initial payment on the home. In Canada, it's minimum 5% of the home price; for a down payment below 20%, CMHC mortgage insurance will be required, which is factored into this calculation.
C =
Specify the interest rate offered by your lender for your mortgage. This percentage will impact your monthly payments and the overall cost of borrowing over time.
D =
Include all one-time costs related to the purchase of the home, such as legal fees, land transfer taxes, moving expenses, and any other closing costs. Typically 1%~2% of the home price.
E =
Estimate the yearly municipal and school taxes, based on the municipality. It's typically 0.5%~1% per year (of property value), but check local rates for accuracy.
F =
Estimate the monthly costs required to maintain your property, including repairs, upkeep, and any condo or HOA fees, if applicable.
G =
Enter the expected annual rate of appreciation for the property’s value. This percentage reflects how much you anticipate the home’s value will increase each year.
H =
Provide your marginal income tax rate, which is the tax percentage applied to your last dollar of income. This is used to calculate the capital gain tax in "Keep Renting and Invest" scenario. If you're unsure, look it up in a tax calculator
I =
For the "Keep Renting and Invest" scenario, indicate the percentage of the total saved ownership cost that is held in tax-advantaged accounts like a TFSA or RRSP. This is for calculating the potential tax savings from your market investment
J =
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- AmountAny single amount ($).
- Cash FlowRent, insurance premium, salary, ...
- Current AssetReal estate, commodity, bonds, ...
- Installment LoanMortgage, car loan, ...
- PercentageAny percentage value (%).
- Years / MonthsAny time horizon.
- AgeShow "Age" instead of "# Years from Now."
- Retirement Age (requires Age)Enable "Investment Return After Retirement."
Time Value Assumptions
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How is Cash Value calculated?
Your Net Worth here mainly reflects the home's value, minus unpaid debt. We factor in a 6% selling cost (broker fees, etc) and the primary residence exemption on capital gain. CMHC insurance premium is automatically calculated if required.
Decisions / Expectations
(Expressions are evaluated at Year 0 only.)
K =
L =
M =
N =
Calculations
(Expressions are evaluated at every year.)
O =
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- Buy AssetBuy an asset growing at its own rate.
- Take Installment LoanTake a mortgage, loan, etc.
- InvestReceive/Spend a lump sum.
- Expect to InvestExpect to receive/spend a lump sum.
- Expect Monthly Cash FlowExpect to receive/spend cash monthly.
- Expect Yearly Cash FlowExpect to receive/spend cash yearly.
- Define Variable (Numerical)Calculate an intermediate value.