Is It Better to Rent or Buy?
Author here. Thought I’d highlight my favorite, perhaps non-obvious feature: the slope of the charts tells you whether the variable is positively or negatively correlated with the cost of buying. And depending on the settings, that slope can change from positive to negative.<p>For example with the defaults, the down payment chart is flat. This means the total cost of buying is relatively unaffected by the size of your mortgage. Felix Salmon pointed out this demonstrates the Modigliani–Miller theorem:<p><a href="http://en.wikipedia.org/wiki/Modigliani–Miller_theorem" rel="nofollow">http://en.wikipedia.org/wiki/Modigliani–Miller_theorem</a><p>Of course, there’s still a big intangible difference between having debt and not having debt, like your ability to respond to market or income changes. And in an inefficient market, loans can be more or less expensive.<p>Playing with the variables and seeing slopes change from positive to negative or vice versa is interesting, too, because these suggest different optimal decisions. Like as your investment return rate goes up, the down payment slope becomes increasingly positive — meaning when stocks are doing well (and assuming mortgage rates aren’t also going up), it’s better to have a smaller down payment and put more money into investments. To a lesser degree, your marginal tax rate changes the slope of the down payment as well, by discounting the mortgage interest payments.<p>The magnitude of the slope also gives a sense of your risk: you can see how sensitive the equivalent rent estimate is to small changes.