New Rent vs. Buy Model

A friend is going through the rent vs. buy question, so I did a revamp of my rent vs. buy analysis.

Some good new features I added:

1) Sensitivity tables at the bottom: Basically, what is the "true cost of ownership of home ownership under different appreciation and house price scenarios

2) I incorporated the ceiling on interest deductibility (max deductible mortgage is $1m, actually $1.1M if you use an incremental $100K home equity line)

3) I incorporated the various opportunity costs on the down payment and the ceiling on tax free capital gains.

Hope this is helpful and look forward to your comments

New Rent vs. Buy Analysis (Link to Model)

Comments

[sf renter]

Hi. I think your tax calculation is flawed. First, you are using a fixed tax rate but income tax is not fixed. It's a progressive tax and its effective rate changes, based on adjusted gross income, which changes based on amount of mortgage interest paid. Your model will show too much of a tax benefit if you assume that all income is taxed at 35%. It is not... You'd also need to calculate a before/after tax scenario for state tax in CA, which will also impact AGI. :)

Finally, this is a nit, but the interest rate is very low. (I know it's a variable, but still.) It seems like you may not be accounting for the fact that this would be a Jumbo loan.

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