Really the most important number, but all of these suggestions are crucial to the calculation. Money that doesn't get invested in a house gets invested in other things. Pretend it's in an index fund.
One thing that I think this actually shows pretty well is the notion that part of the answer depends on how long you intend to stay in a place. If you expect to move in two or three years, it's probably not worth the hassle/expense of buying. If you intend to stay 5+ years in one place, it makes more sense to buy.
Most definitely, my apartment before buying a home was ~$100/month less than my current mortgage, now (3 years later) the rent for the exact same apartment is ~$300/month more than my mortgage.
Isn't that counting inflation twice?
California's recent rent control laws caps rent increases at 10% or 5% + the yearly CPI increase (whichever is less) every year, for example, explicitly allowing rent increases to outpace the general inflation rate. Personally, the rent I pay has gone up 9% this year.
Rents can change based on whether an area becomes more or less desirable, as insurance or other costs for landlords change, as ownership of rental units consolidates, etc.--that is, for many reasons that might be only tangentially connected or even completely divorced from the reasons that the costs of other goods and services are changing.
https://michaelbluejay.com/house/rentvsbuy.html
browsing it might give you some ideas of features you can add to your calculator. It's also a small thing but having the choice to select the downpayment based on percentage down might be nice.
I don't know why your calculator tells me getting a house is not worth even if it thinks the transaction is profitable. It states my cumulative profit is $29,030 but I shouldn't get a house.
The UI doesn’t make that clear enough.
These two functions have some value - especially the latter.
Can you give a more detailed example? What time horizon are you picturing? After you pay off the house you lose the leverage advantage of returns on selling a house you bought with a mortgage vs selling stocks, but you also stop having to pay the mortgage at all while you'd still be renting, likely at a far higher market rate, so looking at the post-mortgage-payoff curves, it's hard for me to see where the invested down payment + (mortgage + tax + upkeep - minus - rent) returns would be expected to be high enough to make up for that.
(The more rational counterargument, though, would likely be around diversification? Better to have land + stocks then just one...)
Also most people don't buy a house for life, and if you sell the house through a realtor they get 6% or so of the proceeds.
This isn't something you can just logic an answer for without running it through a rent vs buy calculator, but investment expert and author William Bernstein suggests a rule of thumb that you should not spend more than fifteen years of market rent on a house purchase. In other words you can look up what the house you are considering buying would cost to rent, and as a rule of thumb if the sale price is more than 15 years of rent it's a bad deal. This is obviously an imprecise rule of thumb since it doesn't account for variations in real estate tax per region, but it's a starting point if you don't have a good rent vs buy calculator.
If your wife wants to buy a place, I suggest finding a compromise to figure out how to make both parties happy.
Off the top of my head, some things I'd add to make this more useful to a wide audience:
- I don't know what I pay in state income and sales taxes. But I do know my income and my state's tax rate; income tax could be derived from that. I'm not sure how you'd estimate sales tax, though - you'd have to know how much of my spending is taxable.
- I've heard a rule of thumb that home maintenance costs are 1% of the home's value per year; maybe default to that, especially since a first-time home owner doesn't really know what those costs are. However, older houses will require more maintenance and that cost probably scales with square footage, not cost.
- you're assuming a 30-year mortgage - I'd put in the ability to change mortgage length. (Also, maybe a link to somewhere where I can find out what mortgage rates are.)
+1 to mortgage length. We heavily pivoted our decision to buy on getting a 7 year ARM because my friend and I knew we wouldn't grow old together there (wanting to do things like get married and have our own families). A time bomb on the mortgage was a feature, for us, and a cost savings.
It's a very poor rule of thumb. Contrary to the other comment, these costs don't increase linearly with value of the house. Sure, if I live in an expensive area, it may go up 30%, but not much more. Looking at how much my house has appreciated, I can assure you I pay not much more in maintenance than when I bought it.
The 1% rule came about when the median house price was under $200K.
Watch any one of the threads on "should I buy/can I afford/pros/cons", and you'll see a vocal subset who seem hellbent on convincing people that owning a house is nothing more than opening your wallet/checkbook/credit card every other weekend for the "next four digit maintenance issue".
(I feel the same way about having kids.)
The final cashflow amount of the house graph (in the example) ends in the negative, s this accurate?
Obviously equipment like this isn't going to appreciate either, and you'll be subject to all the same maintenance costs of owning, so in some ways it's the worst of both worlds— but it may still be cheaper than trying to rent if you can't or won't enter the market right now and mooching from family isn't an option.
Option to account for income from money in sp500.
A pilot once shared with me the rule of the three F's. If it floats, flies, or fornicates, it's cheaper to rent than to own. You may substitute a 4 letter word for that last one.
Anyway, you got a wife already so thats one. House don't start with F, so buy.
Some things it takes into account:
Let me know what you think or what improvements you would like to see!