We are contantly wondering if we should rent or buy a house. If you look online, you can find a lot of rent versus buy calculators out there, but are any of them really that good? Alot of the ones that we have seen online are very simple. They don’t calculate maintenance costs or homeowners dues. Here’s a quick rundown the one’s we have seen.
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A simple Google search for rent versus buy calculators will yield quite a few results. Unfortunately many of these do not offer a true picture of the cost of owning a home.
For each of these calculators, I am using the same basis for renting or buying. The numbers that I am using are $279,999 for the home cost, 5% ($13,999.95) for the down payment, $1236 for the rent cost, 3% for rent increases, 7% rate of return on investments, 6.5% mortgage interest on a 30 year mortgage, 2.5% annual appreciation, $1400 for insurance, $500 for closing costs, 1.1% (yay Massachussets) property taxes, 6% for the future commision of selling the house, 3.1% for inflation, 25% tax bracket, a 7 year stay in the house, $250 per month for homeowners dues and $250 per month for maintenance.
Dinkytown (Grade: B-)
The search starts off with a rent versus buy calculator from Dinkytown. This one does capture all of the necessary information, like homeowners dues and maintenance, but outputs the information in a manner that is unfriendly for those of us who are not uber finance wizards.
Result: After 30 years, we’d be better if we had rented.
Mortage-Calc Grade: F
The next rent versus buy calculator comes from Mortgage-Calc. This is a very simple rent versus buy calculator uses the amount of your payment (it uses the rent as a basis for the amount of the mortgage). This calculator does not allow you to choose how long you will live in the house. It simply does not offer a true picture of the costs of home ownership and makes renting look much worse than reality dictates.
Result: I feel horrible for renting after 30 years. We’d better buy a house now.
Move.com Grade: A
The next rent versus buy calculator comes from Move.com. This is a very good rent versus buy calculator that is very user friendly, and requires all of my data points that are specified above. The results are very simple, so you know how much you will save either way.
Result: Buying would cost us $22,000 over the course of 7 years.
Eloan.com Grade: B
The last rent versus buy calculator comes from Eloan.com. After taking a look at this simple rent versus buy calculator, you’d think that it was too simple. The results page is prepopulated with all the details that they didn’t ask you for originally. The down site to Eloan’s rent versus buy calculator is that you can only enter the details, after you’ve submitted the form.
Result: By buying your home versus renting you will have saved $8,524.28 over the next 7 years.
So, the differences between these rent versus buy calculators is great. A lot of what you will find will very greatly, namely in the way that they calculate your mortgage payment. So, when deciding to rent or buy, a little paper math may prove better to determine your actual home ownership costs.