What The Research Says
- Buying is the best decision when home prices are rising, you make a large down payment (to establish equity), interest rates are low (and you get a fixed rate mortgage), you are planning on living in one place for a long period of time (5+ Years), and your mortgage payment is less than equivalent rent.
- Ultimately unless you spend the money saved (by renting) on other more valuable investments buying is always the better long term choice after about a decade living in a place.
- Younger people might find that the benefits of flexibility and the ability to use the “saved” money for better investments outweighs the equity benefits of ownership.
References
- Buying versus Renting Calculator (NY Times)
- Bank Rate
The Choices
Rent – Mortgage? Property Tax? Long term housing security? You must be kidding…
Score: No Change
Buy – You are willing to take 30 years of crippling mortgage payments over one more “activity fee”.
Score: +1 Risk, +1 Wealth
Parent’s Home – You figure that they brought you into this world, they have a clear responsibility to store you in relative comfort while you’re here.
Score: No Change