That’s a question that I need answered before I will commit to buying - after all, what’s the point of buying if it breaks the bank in the long run?
There are plenty of factors to take into account - inflation, investment earnings, mortgage rates, HOA dues, and tons more. Sitting down and doing math sounds rather unappealing and dry. Instead I looked for tools to help me make that decision.
That’s when I ran across HotPads. They have a very handy heatmap to give you a quick overview whether it makes sense to rent or buy, depending on the area. Here is the Los Angeles area map.
At a glance, I’m now able to find out in what areas it’s (in general) a better idea to buy than to rent. It’s only a rough guideline - you can always find a hidden gem - but it helps to focus the search. (And it helped me pinpoint an area I hadn’t even looked at before)
The next question is, given my current rent and a mortgage of a certain amount, which one makes more financial sense, and how do things change over time?. Thankfully, HotPads supplies me with a buy vs. rent calculator , too.
The way it looks in the sample case, I’ll have more net worth within two years, but I’ll have higher monthly payments for the next seven years. Time to find a better mortgage rate…
I liked the NY Times rent/buy calculator mentioned on lifehacker.com:
http://lifehacker.com/393781/rent-or-buy-calculator-helps-you-decide-which-is-best
This one doesn’t seem to include property taxes.