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Rent vs Buy: Joint Filing + USDA Loan
Compare renting vs buying with a 30-year USDA loan for couples filing jointly. Factor in funding fees and costs to see which option wins long-term.
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. USDA loans are for eligible rural areas and moderate-income couples filing jointly.
A =
Enter the percentage of the purchase price you plan to pay upfront. USDA loans allow 0% down, but you can optionally add a down payment.
B =
Enter the USDA Upfront Guarantee Fee percentage, typically 1% of the loan amount. In this calculation, this fee is financed into the loan.
C =
Enter the USDA Annual Guarantee Fee percentage, typically 0.35% of the loan balance. It’s paid monthly and decreases as the balance is paid off.
D =
Enter the annual interest rate for your USDA loan. Rates are competitive but can vary based on lender and borrower qualifications.
E =
Enter additional upfront buying costs like closing fees, legal fees, and prepaid expenses.
F =
Enter the annual property tax rate as a percentage of the home price. This is an ongoing homeownership cost based on local rates.
G =
Enter monthly HOA fees, if any. Planned communities or condos may have HOA costs, even in rural areas. Leave at $0 if not applicable.
H =
Enter the estimated monthly cost of maintaining your home, including repairs, landscaping, and other upkeep expenses.
I =
Enter your current monthly rent payment. This will be compared to the cost of owning a home with a USDA loan over time. Rising rent costs impact the long-term cost of renting.
J̃ =
Enter the expected annual increase in your home’s value. Appreciation builds equity and impacts long-term wealth.
K =
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.
L =
Enter the tax rate on capital gains when selling your home. Couples filing jointly get a $500,000 exemption on gains from their primary residence.
M =
Enter the percentage of savings allocated to tax-advantaged accounts like IRA/Roth IRA. Couples filing jointly have a $13,000 limit annually.
N =
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- AmountAny single amount ($).
- 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?
With a USDA loan, there’s typically no down payment. Upfront costs include the Upfront Guarantee Fee, which is financed into the loan here. Ongoing costs include mortgage payments, property taxes, maintenance, and the Annual Guarantee Fee. The home appreciates, building equity over time. Couples filing jointly benefit from a $500K capital gains exemption on sale. 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
(Expressions are evaluated at every year.)
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- Buy AssetBuy an asset growing at its own rate.
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- Expect Monthly Cash FlowExpect to receive/spend cash monthly.
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