First time home buyer trying to understand whether it makes sense for us to buy if we only plan to live in the house for 5 years.

Purchase Price: $575k
Interest Rate (optimistically): 5.625%
Downpayment: 5%
Monthly Payment: $6k (mortgage payment + additional principal payment)
Appreciation Rate for this area/type of home: 6.2%

Compared to Renting...
Rent: $3000
Monthly Savings: $3000 (the $6k we would've spent on monthly payment if buying minus rent)
HYS Account Rate: 4.3%

(Cont.)

like
Posting as :
works at
You are currently posting as works at

You may be overly optimistic with that interest rate; factor 6.2% to 6.8% for credit scores between 750 and 850.

like

What does your model say? You have all the numbers needed to calculate it…

So model out 30 year with $1,000 in extra payments.

15 vs 30 amortization doesn’t start to pay off until year 7 or 8. With PMI, just model out getting the 30 year loan but making the same payment as the 15 year. Plus it gives you some flexibility with payments in case your situation changes.

Rate isn’t everything, the amortization table matters here.

(Contd.) With annual interest, PMI, and taxes and onetime closing costs, it looks like we'd barely break even buying. But renting we'd be sitting on $200k+ in savings after 5 years. What am I missing?

Anytime!— fwiw, we are also planning to only stay around 5 years at our first home and chose a home at a price range where our 15 year mortgage principal payment was a bit above what we would save to rent as well. Our homes value has already gone up 4% in the past 18 months, so that’s a nice benefit as well

closing costs will be around 9-18k depending on your taxes
that is a very optimistic rate, how would you possibly get that

Run the model at the 30 year rate. Give yourself the flexibility, especially because it’s pretty much guaranteed that rates will come down in the next few years, and if you have PMI, you’ll be incentivized to refinance and get that removed.

Assuming 6.2% annual appreciation on $575k, wouldn’t it be better off to buy? You would have approx $300k+ equity in the house at the end of five years as opposed to $200k savings. The big question is whether 6.2% is a good estimate.

Also note that mortgage interest and property tax are tax deductible, but rent isn’t.

House
Add 40k at least for selling it
$150-$200 a month for home insurance
5% capital expense - fridge, stove, repairs.
HOA fees
Interest isn’t tax deductible unless you itemize, which 93% don’t.
Your interest exceeds your appreciation, but a refinance in a year or two could change that.

Renting
Switch to an index fund. I’m 80% VOO getting 7.73% 20% HYSA 4.65%. I mixed in a few side trades for a combined 11.27% return yoy. My other accounts are all similar index funds. 4.3% is not a normal return.

Normally I like the house play because you are putting peanuts 🥜 down and getting returns on the 575k. Right now though it’s a gamble on rates. 9-10% rates could kill demand and push prices down. Houses and rates are high. The same could happen in stocks too. I think if you really want the house I’m waiting until fall/winter for a 10-15% discount. Very few markets still make sense to buy vs rent. What market are you in?

Related Posts

Any group still busy heading into the new year? Been dead for months and still dead. Real estate — V30

like

Do we have option to include stock in salary structure in FIS to save income tax?

like

My assumption is that one makes money in RE with leverage. So, would you never let your equity in any given property get above certain% (I.e re-leverage and invest elsewhere) or would one eventually want to own a property outright?

like

If I leave big law for ADA will I get canceled?

like

Where in Atlanta do you live and how much is your home? I thought Atlanta was supposed to be an affordable city? In the market for a town home and it’s only getting more expensive .... single income.

like

Ugh I just signed to fix my house’s mortgage interest rate at 2,73% for 2years. Get a gut feeling this wasn’t a good deal.
Have you fixed or planning to? If yes, how many years and at what rate?

like

Where do first year associates / business analysts typically live in NYC? What’s a realistic rent budget?

like

Which bank account is better for salary account?

HDFC
Axis

like

Anyone following what's happening in MKR? A bit going on recently including investing in real world assets and breaking up the teams into Meta DAOs. 🐂 or 🐻?

Will mods hurt the resale value of a car? I'm considering selling my daily and am debating on whether or not I should put the effort in to return it to stock.

like

15 year at 2.5% vs 30 year at 3.25% fixed rate mortgage loans. How would you think about this and which one would you recommend?

like

Can someone please help me know what is this "gift perk" the comes under the head "Adhoc income" when you see the IT statement(under new payroll) ? This adds up to my yearly Income but I don't see that in my salary slip.

like

Buying a new construction single fam house in PA suburbs. Already Signed the contract and Looking for a lender with lower interest rate. Anyone come across comparable lower IR lenders? Any insight is appreciated! :)

like

As an ignorant man, i cannot for the life of me understand why my wife would think its okay to spend 3k on a purse vs spending 300. Women, please educate me. If background helps, We’re married with two kids. Money is not tight. She has her own job.

likefunny

Any experience with Charles Schwab intelligent portfolio? Thinking of using it.
Is it allowed as part of BDIP?

like

For people who recently refinanced, bought or is in the process of buying a new home, what APR did you get?

like

Any PAs that have another stream of income outside of their PA job? Like business/entrepreneurship or IT?

like

Just got a job at Deloitte M&A in Atlanta and am currently looking to buy a house. Would you advise I buy closer to Atlanta or the suburbs? I personally want to be in the suburbs but I hear the traffic situation is quite bad. Current consultants in Atlanta, how much time do you actually spend in the office vs remote vs client site? Would you advise I try and stay closer to the office?

like

What would be a reasonable cost of renting for a single expat dude in Singapore living in decent area ? Would sgd 4K suffice ?

like

More Posts

Helloo 🎏 .. need your thoughts on below 👇

Post Photo
like

Hi folks! If I quit this week, will I still get my bonus? (My LWD will be around September 26-27)

like

Hi friends I am shifting to Bangalore next week, Currently I am in Gujarat so my bike is having Gujarat passing number plate, So now I want to know that is it mandatory to get BLR passing number plate for my bike or I can use it with Gujarat passing.. pls suggest...

Thanks in advance!!

like

Any cute date ideas for the weekend?

like

I’m shooting for the moon and applying to jobs I am mentally ready for and can qualify for but my resume is very short sweet and to the point because I’ve worked at the same place for 6 year and climbed the ladder & wanting something new. How do I explain that to my future employer?

like

Anyone at Yelp willing to give me a referral?

like

Hello
Can anyone refer me for data analyst role or Ms SQL server or python role?

Thanks

like

How is FIS Global Chennai, need some valuable reviews.
FIS Global

like

After how many years of joining American express I can go for IJP?

like

Can we buy out notice period in Infosys

like

Book recommendations, fishies? Looking for something light, but intellectually engaging—a satire, maybe? Or anything really engrossing! Please help ya chiefy, thank youuuu🤗😘

like

Does anyone pursuing FIRE actually like their current job? Trying to get a grasp of how much of the FIRE movement is driven by escapism from unfulfilling work.

like

What do people recommend for start-up relevant marketing resources/books/personalities/podcasts?
I have a lot of enterprise marketing experience, but making a jump to a startup and want to get up to speed as quickly as possible.

like

Anyone at big4 end up exiting to Stripe Chime Coinbase type fintech and available to chat?

like

Nagarro or accenture?

like
like

Hi people actually i got a call on 30th april that you have been selected to Barclays but still on the career portal it's showing completed. But the hr has told me the joining date but i didn't received anything

like

Additional Posts in The Real Estate Bowl

Under contract to buy my first home - house hacking a triplex. Property has been leased by the same three tenants for the last 5+ yrs, rents haven’t been raised since they moved in. Market rents have risen 70-100% in the same timeframe. All seem like ideal tenants (retired and take great care of the units) but I’d like advice on how to approach the rent increase conversation. Rents don’t make/break my mortgage payment but I’m leaving a lot on the table if I don’t increase significantly.

like

Anyone punched out of state 4-10 unit apt building? How did you find the listing?

like

At what income level should one be comfortable to spend 2400/mo on rent in HCOL? Assuming single, no kids, no debt or major expenses.

like

Looking to buy a vacation home on the west coast not in a major city. West coast so it doesn’t take too long to get there. Could consider other areas, but don’t want to spend too much time traveling there. Budget is under $700k for 3 bedroom, at least 2k sqft. Any ideas?

like

I’m in Dallas and have been renting for 5 years. I don’t have any savings, but have about 30k in my 401k. Im thinking about leveraging that to buy a condo/or house. Is that a good idea or am I in over my head? I mostly want to, because I’m tired of renting and I’ve read reports that prices will only continue to go up. Although, I will have to pay back the 401k + pay rent, so maybe not a good idea. Advice/resources would be helpful.

like

Planning on Arizona, Phoenix area. What is the best today, purchasing a home or building?

like

My assumption is that one makes money in RE with leverage. So, would you never let your equity in any given property get above certain% (I.e re-leverage and invest elsewhere) or would one eventually want to own a property outright?

like

Hey everyone, curious about pros/cons and profitability of renting out a unit long term vs AirBnB. Let’s say it’s a condo downtown in a big city, how do you figure out what’s the better option?

like

Buying a new construction single fam house in PA suburbs. Already Signed the contract and Looking for a lender with lower interest rate. Anyone come across comparable lower IR lenders? Any insight is appreciated! :)

like

I have over 12 years in B2B sales/sales management experience along with a graduate degree. I am wanting to shift gears and I am at a point where I can invest time in myself to learn through practical experience. The new industry I am wanting to pursue is real estate investment. I have read all the books but want some hands on experience on the property management side. How could I best leverage my skills for a role in this, and what should my expectations be for negotiation in compensation?

For people who recently refinanced, bought or is in the process of buying a new home, what APR did you get?

like

Looking for an NJ store selling hardwood flooring that has a decent selection and not too lengthy delivery times.
Everyone seems to have a 4 week wait for hardwood. Any help is appreciated.

like

I went under contract last fall for a new build that will be done later this year. In the contract the seller/builder included a clause that gave them the ability to change the price without cause anytime before the house is complete. This past week they invoked that clause to increase the price by like 7%, supposedly due to material costs. I can either agree to the increase or they return my deposit. My question: is that type of clause even legal? (Cont)

like

What is the term for giving your home buyers a credit for immediate renovations they will have to do before or upon moving in? And how does it affect the seller?

like

Anyone know the average annual rent increase for 1200 sqft 2 bedrooms? I’m renting and want to know what to expect in a few weeks

like

I am looking into buying a multi unit (dullex,triplex,quad) in Chicago ideally in Lakeview East/West, Lincoln Park, Wicker Park, Logan Square, Bucktown areas.

This will be my first property and planning on living in one of the units. Downpayment will come from what I have in stock market but wondering if anyone has any models to how to analyze if it would be a good investment property. Would appreciate any help? First in family to get into something like this.

like

Anyone take the WI Real Estate state exam? Any tips on what to study?

like

Looking to buy in the DMV suburbs (northern VA). Is this the wrong time for such a move? Beyond down payment, got about 6mo emergency fund and must tap into it for moving&house expenses like furniture

like

We are renovating a condo and the previous owner had two Crane toilets (not sure how old, but functioning although seals are old according to our contractor). Back outlet flour mount ones are the only options for the building, and one toilet can cost $300-$500.

We are redoing all the bathroom tiles and walls and debating what we should do with the two toilets. Would resealing the toilets extend the use life? Or should we just replace the toilets? Any other recommendations? TIA!!

like

I share my first property with a family member which is my primary home. If I buy a second property (and keep the first property) and live there, does that second property now qualify as my primary home?

like

New to Fishbowl?

Download the Fishbowl app to
unlock all discussions on Fishbowl.
That was just a preview…
Sign Up to see all discussions
  • Discover what it’s like to work at companies from real professionals
  • Get candid advice from people in your field in a safe space
  • Chat and network with other professionals in your field
Sign up in seconds to unlock all discussions on Fishbowl.

Already a user?
Login here

Share

Embed this post

Copy and paste embed code on your site

Preview

Download the
Fishbowl app

See what’s happening in your industry
from the palm of your hand.

A phone with Fishbowl app

Scan your QR code to download
Fishbowl app on your mobile

Download app

Sign up for free to view this conversation on Fishbowl

By continuing you agree to Terms of Use and Privacy Policy

Already have an account? Log in

Sign up for free to continue using Fishbowl

By continuing you agree to Terms of Use(New) and Privacy Policy(New)
Messaging rates may apply

Already have an account? Log in

For account settings, visit Fishbowl on Desktop Browser or

General

Legal