The Decision Strategist

I’ve updated my spreadsheet for buying versus renting to include information from The Simple Dollar about inflation rates The gist of the whole thing is that inflation really eats into the payments you are making and the amounts you are saving. If inflation is 4% and your mortgage rate is 6.25%, the bank is only making a 2.25% return. Yet another reason why inflation can help the average person, and why the fed usually struggles to keep inflation down. I say usually because the fed has been doing some veeery interesting things with money supply lately. Check out this post for an EXAMPLE.

I also added the assumption that income tax savings from the mortgage were being invested. This evens things out substantially, and the final net worths for each option are closer.

Anyway, here are the new spreadsheets. If you like them, please consider a small donation.

(updated to reflect information from Jon Daley).

Buy vs Rent (openoffice)

Buy vs Rent (excel)

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This entry was posted on Thursday, August 16th, 2007 at 5:10 pm and is filed under Finances, Real Estate.