This might be duh for some people, but if you’re like me and considering a mortgage; at today’s rates in the US at around 5-6%, over 30yr mortgage you will pay about same in interest as you will for your house price.
Your $500k house will cost you around $1M total over thirty years.
I was surprised.
Be careful with this type of math. Avoiding interest shouldn’t be the primary goal, increasing your net worth should be.
For example, let’s say you put down 20% on a $500k 5.5% loan (so $100k down), your payment would be ~$2300. Let’s say rent is $2000 for a big enough place, and rent increases by 4% as well. Let’s also assume your real estate increases in value by 4% per year. Let’s also assume you invest the difference and get 10% returns over that 30 year mortgage. Here’s what you’d be left with according to my spreadsheet (I’m happy to share if requested):
If you put 5% down, your payment will be even higher, but the down payment will be lower, so the house comes out slightly ahead with the rent option becoming $1,527,938.55. But you’ll note that I didn’t add in property taxes, closing costs, repairs, etc, so renting will probably still come out ahead.
That said, this isn’t an apples to apples comparison, and there are a lot of other factors to consider, such as:
In some areas, renting is strictly superior (esp. in urban areas), and in others, owning is strictly superior (with the caveat that you’ll stay put for a time).
Just looking at one factor like interest paid, rent “wasted,” etc won’t tell the whole story, though it can be fun.
Edit: I messed up my calculations because my spreadsheet wasn’t increasing rent properly. This brought renting lower than buying, so I adjusted my calculations to include house maintenance costs (web resources claim 1-4% of home value/year), but still not add in insurance, taxes, etc. This made the numbers very similar, w/ rent + invest being $2,025,801.00 for 20% down and $1,500,606.19 for 5% down. Here’s the webpage w/ the spreadsheet, and here’s the LibreOffice compatible file.
I don’t care about my net worth, I want to live and touch grass while working as little as possible. How do I optimise for that instead?
Go back to respec and pick boomer as your birth generation. The earlier the better, since all of the good level up perks were patched out for later players. Also, try to roll for high family wealth, otherwise there’s a good chance you end up in the same place all over again.