I have attempted to search but cant seem to get the criteria correct.

My question is there a way to calculate or view the ratios of the gain of purchasing your home vs not, I know we all read/hear about people saying that buying a home "effectively" gives you a rebate from the tax discounts to cover some of the home purchase, however I would like to know if there was somewhere we could go or lookup how much it is.

Or if anyone had a formula or plan for it (like income * tax rate - mort int, etc...)

Thanks

I have a massive spreadsheet that attempted to calculate that. I gave up when I realized it depended entirely on the data I could feed my model about things like inflation, opportunity cost of money, potential changes in the rental market, etc.

The net result appears to be "yeah, you'll probably save a little money on your federal taxes. But as soon as you need a new a/c unit and to replace some rotten siding, and to take out a very tall dead tree, and... - that will seem like a -very- little money."

ITA, that's about as scientific as it'll get. There are all sorts of unknown expenses related to home ownership that would be impossible to forecast.

I think folks get into trouble buying homes based on projected savings or gain. If you like the home, it's in an area you want to live long-term, can afford the payments comfortably and aren't overly concerned about short term fluctuations in value- those would seem to be better criteria.

Ok I can deal with those types of responses. Im not purchasing to save money per se (however now that were hitting the upper tax bracket it might be good to get back down), but I hear alot of people saying "Im going to have xyz more a month b/c I purchase a house" and things like that and wanted to know how/why they came up with those figures.

The simplest calculation (and what most people probably do) is (annual interest paid - standard deduction) * marginal tax rate. Except that they forget the standard deduction part, and may or may not have much else worth itemizing. It just happens to yield a fairly imaginary number.

It is unlikely that anyone would INCREASE their cash flow during the term of the mortgage by buying. Unless they get some bizarrely good deal picking up a foreclosure or something, the all-in expenses of homebuying are far greater than an alternative rental. (Of course I'm talking about comparable conditions, same area, etc.)

Anyone claiming otherwise is probably forgetting to account for a lot of things. Even assuming you have a case where the mortgage payment is less than rent, the house additionally means paying property taxes, homeowner's insurance, possibly a homeowner's association fee, typically higher utility bills, and a myriad of incidental expenses like lawn care, appliances, etc that go along with being a homeowner.

If and when a home proves to be a good investment it is a long-term thing resulting from capital appreciation or eventually paying off the mortgage -- improved cash flow up front is NOT the benefit.

Homes are EXPENSIVE!!!

Seems like as soon as you move in, people are at your door peddling their business: Pest Control, Alarm System, Cable, Newspaper, ETC.

I am sorry, I could not understand the meaning of that statement.

YOU PAN PAY THE MORTGAGE FOR YOURSELF (own) or PAY THE MORTGAGE FOR SOMEBODY ELSE (rent)

Rent you don't have to pay for any repairs (unless it is your fault it was broke)

But the landloard doesn't always make YOU first in line

I think he means he's going to go to his boss and demand a pay cut.

Besides mortgage payment and PMI if any, a lot depends on what you assume about future home price changes, property tax changes, maintenance costs, HOA fees etc.
Mortgage interest is deductible only if you itemize on your return. Then it's deductible up to a cap that falls as your AGI increases (itemized deduction phaseout, itemized deductions include all itemized deductions such as charity, medical, state taxes, as well as mortgage interest).

If you rent, you're *already* paying for all this

The costs are both psychological even beyond that hard to predict ahead of time. In general investing in a house is good for the long term and renting is good if you'll expect to move in the short term. In some areas you definitely come out ahead renting instead of buying and putting the money you would have otherwise spent in a long-term investment vehicle, but if you're like a lot of people and would end up spending the savings instead of investing it that is a false benefit.

This is a somewhat useful application that I found when I was making the rent/buy decision a few years back:

http://www.nytimes.com/2007/04/10/business...NT_GRAPHIC.html

Even with this or more advanced tools, though, to get the answer correct (meaning in 10 or 20 years which would have made you richer) you'll have to correctly determine the local real estate market, the performance of your investments, and either your ability to repair/maintain your home or your ability to find reasonably priced apartments.

Good luck!

I saved $200+/month by BUYING A HOUSE vs renting the condo

Unbelievable as it is, I will save money by owning than renting. I also liked what your wrote because it is sooo true, "But the landloard doesn't always make YOU first in line" I am kinda sick of that!

Owning is a very personal decision and it has to be entered with after thinking it through to see if it makes sense. It can be a lot of responsibility.

My current mortgage is about $150 less than what it would cost to rent something comparable- including taxes, ins, etc. Blowing a furnace could throw that the other way, but even so it'd only be a temporary reversal. Long term it'd be more expensive to rent.
The downside to owning is, well....that you own, lol. I have a house in MI that I can't get rid of.

Unless you're not... the house across the street sold in a foreclosure auction for $595k. Its the exact same model as the house I live in in similar condition.

We rent ours for $2100 a month.

Sometimes the rent vs. buy decision can be easy to make. Would I like to own a place? Sure. But as long as my rent is this cheap, it wouldn't be prudent for me to do so. The difference between my rent payment and his mortgage payment goes right into the bank. Someday I'll have one heck of a down payment for a home of my own!

I tell people that paying rent for 10 years at $1500 dollars a month is equivalent to 120 X 1500 =180,000. If you are in a decent stable market you could get 10% appreciation average per year. If this was true, you would double the value of your house in 10 years. Your payment P&I would remain the same for 30 years (rent goes up yearly) and you (not your landlord) get the tax breaks, the equity and the "no rent" post 30 year pay-off.

So, the real questions is, after 30 years renting, and paying about the same for rent vs. mortgage where would you be better off at the end. Paid home in your name vs. paid home in your landlords name?

I like the pospect of not having to pay rent after I pay off the house. I also like the prospect of reducing my tax burden for mortgage interest paid, mortgage insurance paid and the tax credit "gift" subsidy for $8000 dollars you get if you buy your first house in $2009. I am sure I am missing some benefits. Maybe like living in a place you don't have to share the walls, and where you can add on and improve at your liking since it will benefit you and your home value.

Dating life is better too when you own your own home. Try telling her "honey, would you like to come back to the small apartment I rent for $1500 a month and share with a friend?" or " Lets go back to the house I just bought."

I still like the "own" scenario better.

The first one is extremely rare. The second statement reeks of bad math :-)

moreover...the real rate of return will not be the nominal 10% per year...

What some people do not consider is the "flexibility" of renting. Some people prefer to rent, because they want the ability to "relocate" with ease.

Once you own a home, if you have to move, you are subject to the current market value (sales or rental). A home is an illiquid asset. For some people, a 30 year span may include significant life events (marriage, divorce, new job, children, children moving out, retirement, etc.). With some life events, a move may be required.

It is often not a simple 30 year comparison based on monthly "costs" or "tax breaks."

I could have never been in the place to have $100,000--->$150,000 EQUITY BY RENTING

There are also down-sides to owning

But you take the good with the bad

Like today I was painting the garage wall outside

I had to mow the back yard

The water heater died

Part of the wood fence blew down is a big wind storm

If I was a renter I would not be doing any repairs or making sure they got fixed by somebody else

There are pros and cons to renting vs owning, depending on where you live, lifestyle and the economic environment.

there is no one size fits all solution like many preach

Huhhhh

"IF" you can RENT for $100's or $1,000's less than owning...GO FOR IT

For me, it's not even so much about rent being cheaper, which yes it is. I rent a two bedroom (technically, LL claims it as a three bedroom, but I'm not counting our "playroom" as a bedroom ) house. We pay $800.00/month.

Right now, we are not in a position to buy. We're trying to pay down debt, get DH outta school into a good paying job, and then we will start saving for a house.

It's completely impractical to try for a house now. We can't afford to buy. And I dont' think we'd qualify anyway.

All i know is that everyone i personally know that bought the last 3yrs in my area is underwater on their mortgage; some of them have even borrowed moey from me to get to their next paycheck.
I like being liquid in investments and housing. if my financial situation changes for the worse i can easily find living accomodations to fit my budget but if i had a mortgage i could be stuck and in a tough position.

I will buy when I have at least 30% of the purchase price as a down payment(20% down and 10% in reserves) and i can afford the mortgage+taxes+maintenance are 25% of my income

I like this philosophy -- in fact I've read that traditionally if you put 30% down, there is no credit check (since the buyer has such a stake in the deal from day 1). I wonder if that's still the case?

did they buy planning to see 3 years after the purchase?

Did they buy planning on losing their job and income within 3 years after purchase?

you may not be able to predict the future with accuracy but u sure as heck can plan for the worst. Have enough liquid assets on hand to get you though tight financial situations. A home is not a liquid asset as too many were taught to believe with aggressive marketing of HELOC's.

Given the recent history of massive corporate layoffs, eradication of unions, manufacturing and white collar jobs outsourced overseas, 401k's replacing pensions, healthcare costs skyrocketing, etc, etc, etc. The old rules of thumb for home buying or as a nest egg have gone out of the window. Larger cash cushions/savings is the name of the game.

I know so many intelligent and well educated people who have made huge incomes but saved so little in the recent economic downturn and are now scraping by.