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PF Confession

February 20, 2014

Confession:  Even if home ownership is more expensive than renting, we’ll most likely still buy.

Not certainly, just probably.  We also probably won’t wait to see if T gets tenure.  Seven years is a long time to wait, and we may take a gamble.  And if he doesn’t get tenure, I’m not so sure we’ll jump up and move wherever in the world he can get a new job.  He might be “stuck” looking at his options locally.  Maybe not, but I just can’t predict that.

I ran the New York Time’s calculator, and with our current rent and a $750k house (that is just a number, not a plan!), buying is NEVER better than renting.  Looking at it more holistically, I compared what I’d expect to pay in rent for a more long term type of place.  Still, it will take 11 years for buying to make more sense (without fiddling with the assumptions much).

I’m not sure how taxes are taken into consideration.  I know we pay a LOT in taxes, and it is only going to get worse.  I’ve heard mixed reviews about whether this is actually a big deal.  I’ll eventually run some better numbers to get a handle on how much we’d be paying for the privilege (slash hassle) of owning a home, but for now, we’re just feeling out the options.  Our timeline is to start looking more seriously next spring.

EIther way, step 1 is to save a lot of cash.  We currently have about $50-$60k (excluding e-fund) that we saved throughout our marriage while T was wrapping up school, $60k as part of the moving package, and hope to save about $30k this year, not including any bonus from my job.  In theory, we could buy with 20% down within a year.   In reality, $200k might be a nice round goal, which puts us a little later.  We could always ramp up savings by decreasing T’s retirement savings a bit, but he’s a bit behind me so dumping the max into tax-sheltered accounts probably smart for the first few years at least.

Next step:  Scrub our ridiculous non-budget spending, and see where we could/should cut out things.  I can think of two immediate places to cut:  restaurants & wine.  And clothes, I guess.  More to come!

5 Comments leave one →
  1. February 20, 2014 9:06 am

    The New York Times calculator does take taxes into account somewhat because you can deduct property taxes, mortgage interest, and state sales/income tax.

    It sounds like you guys are buying because you want to live in a house long-term in the area you’re in and that is totally legit too! I bought a condo because the New York Times buy vs rent calculator told me it would basically be cheaper to buy a 2 bedroom than rent a 1 bedroom within 2 years and I saw myself living in an apartment for the subsequent 5 years.

    I hear you on the clothing spending, sigh. At least I’ve been returning a bunch of stuff 🙂

    • February 20, 2014 7:47 pm

      I didn’t see the tax places, but I don’t doubt it was there.

      I think a LOT of people buy because they want to live in a house long-term, but many people also feel a need to try to make the numbers show it is a good investment. I’m not to worried about it. 🙂

      • February 24, 2014 4:39 pm

        I’m with you – we’ll eventually buy, and a SFH will be at least $650K+, likely $750K, by the time we get our act together.

        I just really like the idea of a house (especially the idea of owning a home that I can grow old in), and I’m willing to pay more to have it rather than renting.

  2. February 20, 2014 1:46 pm

    I want to buy because we want to settle long term and have kids and live somewhere that’s insulated and healthy. Renting is cheaper than buying here, because it’s just the two of us in a tiny place, but it’s not equivalent – not if we want to rent the kind of property that we’d live in long term and be able to have kids in.

  3. February 22, 2014 5:40 pm

    I bought even though it was *technically* more expensive than what I was paying for rent – in terms of absolutely monthly costs. However, I was house-sharing a 2 bedroom condo, so I was only paying half the rent – and I bought a 3 bedroom house, so it wasn’t really comparable. I put enough down though, that it’s much cheaper for me to pay the mortgage and property taxes than to rent a 3 bedroom house in my location – even though I would never have rented a 3 bedroom house.

    So – I’m definitely paying more monthly by owning than I was renting – but I am *really* enjoying living by myself without housemate drama 🙂

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