Renting gives you more benefit over 30 years term
A lot of variable come into play so make sure you read the detailed explanation below.
In your situation buying a house for 755 613.00 will have the immediate cost of the 75 561.30 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 1 834 071.08.
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 1 183 780.40.
So the total net sum after buying: 650 290.68
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 75 561.30 to a profitable portfolio..
Plus what you save on the mortgage (roughly 788 237.78 total) you can add to the same investment. Increase it further and make that money work for you.
Your original investment of 75561.3 in 30 years turns into 5 275 321.21 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 1 055 411.11.
So the total net sum after renting: 4 219 910.10
By renting and investing the money left by not buying the house, you gain more net assets by the end of the 30 period.
Equity | Non-recoverable cost | Total net sum | |
---|---|---|---|
Renting | 5 275 321.21 | 1 055 411.11 | 4 219 910.10 |
Buying | 1 834 071.08 | 1 183 780.40 | 650 290.68 |
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