"HOW MONTHLY COSTS COMPARE Key in any housing calculation is monthly cost. Our example estimates California house rent today at $4,000 a month vs. buying a $900,000 house with a 10% down mortgage at 6.5% plus property taxes, insurance, association fees, and repairs. The scenario assumes costs grow with historical inflation and the mortgage rate is lowered twice by a half-point through refinancing."
"RUNNING THE TAB Homeowners need to repay their mortgage plus cover a range of additional costs. THE BOUNTY: Ownership's edge Owning's true financial benefit arises from the increasing value of the home. Assuming historical gains of 5% per year, the owners gets a $3.8 million asset after 30 years. The renter, who hypothetically invested the $90,000 down payment in the stock market, would accumulate $929,000. Here's investment value by year, in thousands of dollars."
Monthly cost drives rent-versus-buy comparisons. The example sets rent at $4,000 per month and a purchase price of $900,000 with 10% down and a 6.5% mortgage, plus taxes, insurance, association fees, and repairs. Costs rise with historical inflation and the mortgage rate is reduced twice by half a percentage point. Renting stays cheaper for nearly two decades, while owning becomes slightly less costly over 30 years. At 5% annual appreciation, ownership yields a $3.8 million asset after 30 years. A renter investing the $90,000 down payment in stocks would accumulate $929,000. Owner payments cover principal, interest, taxes, insurance, association fees, and maintenance; interest and property taxes may be deductible. Historical 10-year moving averages inform growth assumptions.
Read at The Mercury News
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