Rent VS Buy Calculator

[Anonymous]

I am using a Rent VS Buy Calculator from this web address: https://www.lendingtree.com/rent-vs-buy-calculator

and I was wondering if anyone would be able to understand how in the graph, the buying expenses exceeds the price of the desired home. 

As you can see, the buying expenses starts very high, drops to a low and then makes a slight incline back up, where you will then see the same vale in the legend/table underneath the graph that displays the information. It is basically showing that the buying expenses will be lower than the renting expeneses.

[NC_Mtg_Loaner]

I don't think you are reading the graph properly.

If you buy a home that costs $450k and stay in it 1 year--your cost of buying is $450k just like the green line shows.   Stay in it for 2 years and the average cost is $225k per year and so on, but the cost of ownership decreases over time.

[Anonymous]

When I hover my mouse over the green line at year one, it shows that the buying expense is at around $530,000~ and if you move the mouse out of the graph a little, it shows the buying expense is at 700K.

Where on the graph are you seeing 450k in buying expenses?

[Anonymous]

Mightymouse123:

     First thing this calculator is zip code specific and if you put in a different code you will get different values. So to compare exact values we need to know what code you’re putting in. Secondly, we do not know what value you used for a rent cost. That also affects the results. Remember that year one is AFTER the first year. The formula includes closing costs, up front taxes, insurance etc. It also appears it is calculating this with a unique down payment (how much can be calculated but I didn’t). Furthermore, it makes several assumptions (appreciation for one) that may not be true baseline values like other calculators use.

     Fundamentally, I don’t like this calculator for I don’t feel it is that accurate. I’d recommend using this one. https://www.trulia.com/rent_vs_buy/ or this one https://www.realtor.com/mortgage/tools/rent-or-buy-calculator/ It appears Lending Tree really wants you to buy and we all know that is not always a good deal. If you put the same values in the Trulia or Realtor calculators you get a more realistic value (I believe).  Here are the variables I used. Zip = 33967 (no it’s not my home). Target rent $2,000/mo. Home price $420,000 with 20% down. Time 10 years. This shows a breakeven point between 5 and 6 years (depending on amortization time). You can expand these results to see all the inputs and adjust them as you know for sure in your area. Hope this helps

Y

[Anonymous]

Thank you for the input, but it did not answer my question on how the buying expense is higher than the price of the home in the beginning years

[Kree]

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@Anonymouswrote:

Thank you for the input, but it did not answer my question on how the buying expense is higher than the price of the home in the beginning years

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Its an error, the calculator is (i don't know why) adding the projected "home appreciation" value to the first year expenses.   So if over 10 years it thinks the home will appreciate 150k   it adds 150k to the first year.

[Anonymous]

When I add the default home appreciation value I they give (154,762) , it does not add up to the buying expenses on year one.
450000 + 154762 = 604762

That value is not plotted on graph. The appreciation value is also based on what it would be after 30 years I think

[Kree]

Huh, found an interesting glitch.  when I move my mouse over the Y axis, it will give me a "Buying expenses" value of wherever my mouse is, not the actual buying expense.  So I was looking at a value of 604009 instead of the 584742 I get when looking at the Buying expenses with a green ring.

Also playing with the options. I now have a buying expense of 2,000,000 in year 4.  So lets just go with the calculator is broken, and figuring it out won't be a beneficial exercise.

[Anonymous]

I see, but whether it is broken or not, the calculator must be intentionally made that way, which means they are doing some math that will get those results. I know to get Buying Expenses, I just need to add up :

total interest

property taxes

total closing costs

home insurance

selling expense

foregone income

 and subtract that from 

tax savings

home appreciation

hoa

Which makes this calculator make even more less sense. Shouldn't buying expenses technically be very low starting out and then gradually increase to a final value at the end of the term period?

[Anonymous]

MM I can't answer the question because I feel that calculator is inaccurate - sorry. But you can use the other calculators and get data that does make sense, if you want. As my dad use to say; "If the door won't budge, stop pushing it probably won't open. Walk around back where the other door is wide open."

Y