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Rent vs Buy: Joint Filing + Conv Loan
Compare renting vs buying with a 30-year conventional loan for couples filing jointly. Factor in costs, taxes, & investments to see which costs less over time.
Last update Dec 2024
- Scenario 1: Cost of Homeownership
- Scenario 2: Cost of Renting
- Which One Is Higher (%)
This chart shows the total cost of living under two scenarios, factoring in missed investments, rent increases, taxes, and equity growth. The higher curve shows the costlier option.
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 price of the home you plan to buy. This is the base value for calculating your mortgage, down payment, and long-term appreciation.
A =
Enter the percentage of the purchase price you plan to pay upfront. A minimum of 3% is allowed, but 20% or more avoids mortgage insurance (PMI).
B =
Enter the annual PMI rate as a percentage of your loan amount. Typically 0.5%-1.5% applies if your down payment is below 20%. PMI ends once 20% equity is reached.
C =
Enter the annual interest rate on your loan. A lower rate reduces monthly payments and total interest paid over the life of the loan.
D =
Enter additional upfront buying costs, such as closing costs, legal fees, and other one-time expenses when purchasing the home.
E =
Enter the annual property tax rate as a percentage of the home price. Property taxes are ongoing costs that add to homeownership expenses.
F =
Enter the monthly cost for homeowner association (HOA) or strata fees, if applicable. These are regular fees for shared property maintenance and amenities.
G =
Enter the estimated monthly cost of maintaining your home, including repairs, landscaping, and other upkeep expenses.
H =
Enter your current monthly rent payment. This will be used to compare the cost of renting versus buying a home and investing the savings. Annual increase % reflects rising rental costs over time as an alternative to fixed mortgage payments.
Ĩ =
Enter the expected annual percentage increase in the home’s value. Appreciation builds equity and impacts long-term wealth.
J =
Enter your marginal income tax rate. This rate is used to calculate the tax savings from deductible costs like mortgage interest and property taxes. It reflects the tax you pay on each additional dollar of income.
K =
Enter the tax rate on capital gains when selling your home. Couples filing jointly get a $500K exemption on gains from their primary residence.
L =
Enter the percentage of savings allocated to IRA or Roth IRA accounts. Couples can contribute up to $13,000 annually for tax-advantaged growth.
M =
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- AmountAny single amount ($).
- 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?
When buying, upfront costs include the down payment and closing fees. Ongoing expenses cover mortgage payments, property taxes, HOA fees, maintenance, and PMI (mortgage insurance) until 20% equity. Mortgage interest and property taxes offer tax savings. Home value grows with appreciation, building equity; at sale, capital gains tax applies to gains over $500K. The final cost equals the missed investment value of all buying and ongoing costs minus appreciated home equity.
Decisions / Expectations
(Expressions are evaluated at Year 0 only.)
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Calculations
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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.