Why don't you buy a house?

(It's not always better!)


Parameters









Stamp duty
(paid at purchase of house)
Band 1:
Rate 1:
Band 2:
Rate 2:
Band 3:
Rate 3:
Band 4:
Rate 4:

Capital gains
(paid on stock, not on home appreciation)
Band 1:
Rate 1:
Band 2:
Rate 2:

What is this?

This is a calculator to compare the expected returns of (1) buying a house with a mortgage and living in it, against (2) not buying a home, renting instead and putting what would be paid to deposit, taxes and mortgage into a portfolio of stocks.

The model is quite simple and is not meant to provide a detailed projection. This is not financial advice!

How does it work?

For the case of buying a house:
  1. For each year, we find the amount of equity earned in the property, and the amount paid to interest.
  2. For the equity earned, we increase it by the house price growth rate.
For the case of not buying:
  1. We initialise with the deposit plus stamp duty that would be paid for purchasing the house.
  2. For each year, we update the value by: (1) growing it at the given stock growth rate (2) subtracting what would be paid to capital gains tax (3) adding what would be paid to the mortgage (4) subtracting what would be paid to rent.
  3. We also assume rent costs increase at the same rate as house prices.

Tips:

  1. Don't just consider the rightmost value of the graph! You should choose the point on the x axis where you are likely to sell / move house. At this point, if you bought a house, you'd need to pay stamp duty again. If you didn't buy a house, you can choose to do so.
  2. There is no currency because that doesn't affect the calculation.
  3. There are many non-financial reasons to buy or not buy a house, which are not the concern of this tool :)

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