I don’t know if deciding to buy can be a rational decision, one based solely on whether or not it’s cheaper to stay renting.

I’ve never had a friend say, “Oh, it’s cheaper to rent, so I’m going to rent.” I think it’s more complicated.

Still, it’s a very good exercise to go through: calculate the cost of owning vs. the cost of renting.

If you’re going to buy a condo in the city, figure out what your monthly mortgage loan payment will be, using a fixed-rate mortgage loan (it’s the loan you’d most likely take out, at this time).

Add in your monthly condo fee (figure $150-$250 for a condo in the typical five-storey Victorian bow-front). Then of course, you have to add in property taxes. You will pay property taxes monthly, to your bank, who will then pay the property tax, directly to the city, each quarter. Figure 1% of your purchase price, for estimated annual property tax.

To calculate your actual annual housing expense, you need to figure out what your federal tax benefit will be. Use a mortgage loan calculator to figure out how much interest you’ll be paying on your loan, during year one. Multiply that by 25%, to get an estimate of how much you’ll save on your federal taxes (each year you’ll save less, of course, as more of your monthly payment goes toward principal, and less toward interest).

Ignore homeowners insurance, for this exercise, since you’d have renter’s insurance, too. Ignore monthly utilities, since you’ll pay them as both a renter and homeowner (unless your condo fee includes heat and hot water).

On the renters side, make sure you include the savings you get on your Massachusetts income tax return, up to $2500 against your taxes.

I’m guessing you’ll figure out that it costs more to buy than to rent.

But, again, it might not be simple dollars-and-cents, for most people.

I don’t think the housing stock is as good for renters as it is for homeowners, and that’s something that isn’t easily quantifiable (sp.). What price do you put on clean, well-kept common areas? On granite countertops and new appliances? The security of living with other homeowners, who probably take better care of their homes?

More information: Rent or Buy? Decision Depends on Geography, Finances and Lifestyle – By Tomoeh Murakami Tse, The Washington Post

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Updated: January 2018

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