"Is it better to buy or rent?" For first-time homebuyers, this can be a hard question to answer. The idea of owning your own home can sound incredibly appealing -- you have complete control over improvements, you're not paying someone else's mortgage every month, and ideally it's a smart investment in your future.
But does owning a home always trump renting, in terms of what makes financial sense?
The New York Times recently published this very helpful calculator that helps to answer this question. Just plug in your current rent, along with a sample purchase price, down payment, interest rate, and annual property tax rate, and see what the data shows.
For example, let's say you're currently paying $1,200 a month in rent. You're interested in buying a home for $225,000, with 20% down at a 4.3% mortgage rate. If you plan to stay in that home for 6 or more years, buying is the smarter choice -- after 6 years it would cost you $1,479 less than renting, an average savings of $247 each year.
After you plug in your numbers, the calculator will chart the savings you'd see each year, for up to 30 years of ownership. Plus you'll get a breakdown of various costs associated with both buying and renting options. (One important note: The calculator may not take into account the various tax deductions that you qualify for as a homeowner. You can read more about those tax deductions here.)
If you're curious to see how long you would need to stay in a home for it to begin saving you money each year, check out this handy tool -- you may be surprised at what you find out!