Total investments
Rent cost
Rent result
Home value
Non-recoverable cost
Buy result
Buying gives you more benefit over 30 years term
A lot of variable come into play so make sure you read the detailed explanation below.
Buying
In your situation buying a house for 288 746.00 will have the immediate cost of the 28 874.60 deposit which you could invest into a stock based portfolio instead. That is a missed opportunity cost.
On top of that you need to pay interest on the mortgage and other secondary costs that are frequently ignored such as maintenance cost and property tax. We don't consider principal repayment (the capital part of the mortgage) because it goes directly to your pocket (figuratively speaking).
However real estate appreciates over time just like stock price increase (although slightly slower). The historical average across many countries are around 3% so this is what we use for calculation. At the end of 30 years your house will worth 700 862.33.
Your total non-recoverable costs (you cannot reclaim this by selling the house) of owning this home/apartment over the 30 years will be around 449 476.04.
So the total net sum after buying: 251 386.29
Renting
With renting you don't have any upfront cost and you don't pay any additional tax. Even better you don't have to worry about the maintenance cost of the house (to a certain degree of course :) ).
So you can invest 28 874.60 to a profitable portfolio..
Plus what you save on the mortgage (roughly 31 129.12 total) you can add to the same investment. Increase it further and make that money work for you.
Your original investment of 28874.6 in 30 years turns into 568 307.98 assuming the specified 10.0% will be correct.
On the flipside you do have to pay the rent throughout all these years which most likely will grow over time. Calculating with a reasonable 0.5% yearly rise of rent price to total cost will be 693 441.22.
So the total net sum after renting: -125 133.23
Should I rent or buy then?
Buying
Based on these figures you're better off if you're buying the house or apartment you're dreaming of.
Total net asset value over time
| Equity | Non-recoverable cost | Total net sum | |
|---|---|---|---|
| Renting | 568 307.98 | 693 441.22 | -125 133.23 |
| Buying | 700 862.33 | 449 476.04 | 251 386.29 |
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