Costs:
20% Down = $100,000 (one-time)
30-year loan at 4.5% = $2,000/month (approx)
Property taxes, 1.125% = $520
Insurance = $150
Repairs = $200
Total = $2810
Deductibles:
Equity by paying your loan = -$533/month
Interest write-off = 4467/12 = -$372/month
Total = -$905/month
Extras:
Opportunity cost of not investing down-payment in S&P 500 = 8% interest on $100k = $666/month
Appreciation: 3%/year (hypothetically) = -$1,250/month
Net cost of ownership = $1,321/month
Total “cashflow cost” = $3,536/month
If you sell, you will get $577,000
There will be a debt of $348,000 remaining
Out of pocket expenses over 7 years = $142,000
This is $20,286/year
The net “loss” is $1,690/month
Costs:
Rent out of pocket = $3,000
Extras:
Invest down-payment in $S&P 500
= 8% interest on $100k = $666/month
Total “cashflow cost” = $2,234/month
Total cost of living over 7 years = $196,000
which is $54,000 more than owning
which is $643/month more than owning
(This does not even take rent increases into account!)
*The cost of housing, interest rates, and rents are hypothetical based on an approximate value close to market prices. They might change in the future, so use this example as a template to do an actual comparison based on your location and circumstances. Rent also increases every year, and this calculation does not take that into account – But that means that owning a house would come out ahead of renting even faster.
If you want to calculate the house-owning cost with different values, you can check out Dave Ramsey’s mortgage calculator which lets you adjust all the values.