Buy A House Or Rent
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Buy A House Or Rent?
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This spreadsheet will help you answer the question that many Americans ask, should I keep renting or buy a home? Buying a home can have financial advantages, but many times these are overstated, and hard to figure out exactly how much these savings are.
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Instructions:
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First, make a copy of this in your own Drive. Click File... then Make A Copy, and give it a name. This will put it in your own Drive so you can edit. Once you do that, then enter numbers or estimates in each cell that is yellow. Once you enter everything in, the section on the right will tell you whether it makes more sense financially to rent or buy, and how much money you'll save by buying or renting. This only considers the time from now until you would sell the house that you are considering buying. Please read the disclaimer at the bottom.
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Note that the accuracy of this all depends on a good estimate from you on how long you think it will be before you sell the house you're looking to buy, and how much you think it will sell for. Be realistic. The younger you are, the less secure your career is, and the more your income will change from year to year (both up and down), and the more likely you are to sell within 5 years.
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Home Purchase
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(this assumes an FHA mortgage)
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Estimated New Home Price:$300,000Monthly Rent:$1,600
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Down Payment %:5.00%Monthly renters insurance:$15
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Down Payment:$15,000Total cost of renting:$96,900
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Mortgage Amount:$285,000
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Interest Rate:3.88%Monthly payments from owning that you don't get back:$97,257
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1.25% FHA Insurance Premium:$3,750(interest, taxes, etc.)
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(fee for an FHA mortgage)Profit from owning:-$177
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Other Closing Costs:$5,000Total cost of owning:$97,434
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(closing costs are difficult to estimate, they vary widely by county/city, $5000 is a good guess)
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Money required upfront:$23,750It makes more financial sense toRENT!
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(you need this much money upfront to buy the house)
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You will have saved$534
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Mortgage, other monthly costsin 5 years by RENTING instead of owning
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(these costs are how much you'll pay every month)
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Principal:$420If you want to buy a home, see my other spreadsheet template for whether you can afford the house or not:
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Interest:$920https://docs.google.com/spreadsheet/ccc?key=0Al_XAoAHsV3edDFnZ09YMWg5WS1TOEt4U05QUWxmalE
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Yearly Property Tax rate: 1%
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(varies by county/city)
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Property Tax:$250
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1.5% PMI:$356(required for FHA loans where down payment is less than 22%)
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Homeowners insurance estimate:$50
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Homeowners Association/Condo Fees:$87
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Monthly Cost:$2,083
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Selling the house
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In how many years5(be real, how long before you want something bigger, something nicer, etc.)
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Selling price:$320,000(be real here too, it's not 2004 any more, if the value goes up it won't go up by much)
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Closing Costs:$3,000(difficult to estimate, leave at $3000 unless you know otherwise)
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Realtor fees (6%):$19,200(in case you didn't know it, the buying and selling realtors each take 3% of the sale)
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Mortgage Owed:$257,251
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Total amount left with after sale:$40,549(how much money you'll have to put in to a second house down payment)
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Total monthly payments while owning
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Total principal paid:$27,749
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Total Interest Paid:$52,662
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Total other payments:$44,595
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Total of monthly payments:$125,006
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Tax deductions while owning
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(being able to deduct mortgage interest from taxes is often cited as a big reason to buy a home, this will show how much this deduction will actually be worth to you. It's probably not as much as what you think)
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Mortgage deductable expenses in a year$18,319(interest and property taxes)
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Other itemized deductions per year$2,500(hard to estimate here, just guess what your state income taxes are + charity)
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minus standard deduction$5,800(what you can deduct while renting, if you don't itemize, which you probably don't)
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Extra deductions per year from owning:$15,019
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Federal Tax Bracket:25.00%http://www.moneychimp.com/features/tax_brackets.htm
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Value of extra deductions per year$3,755
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Profit from owning
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Home value appreciation:$20,000
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Buying and selling fees (closing, realtor, etc):$30,950
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Home repair/maintenance while owning house:$8,000(big guess here, don't underestimate this. This is a total number, not a yearly amount)
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Total value of tax deductions:$18,773
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Total profit:-$177
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Known Problems with this spreadsheet:
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Some assumptions are made here, like you'd be using an FHA mortgage. There are a lot of complications with these, and I don't personally have an FHA mortgage, so I'm going by what I read here. I believe that FHA monthly PMI is tax deductible so I put in in this category but I'm not 100% sure, I think if your income is over $100,000 it's not deductible. Also, the deductions assume you're filing singly, if you're married filing jointly, increase the standard deduction to $11,600.
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Disclaimer:
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I'm not a financial consultant or in the finance industry. While I've made every attempt to make sure that these numbers are accurate, I can not be held responsible if these calcuations are not correct.
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