Ok, so just for the sake of argument let's call that 3.5% (corrections appreciated) and thus over the next 30 years, presuming your carrying charge stays the same at +3.5%/yr, you'll pay a total of $352k or an average of $977/mo ... yes? Just trying to normalize all the variables. FWIW, a $250k mortgage @ 6.25% is about $1550 gross, perhaps a $400 tax savings, so we're getting closer ...
[WS:] Correct, but you forgot a few important details. First, to get a $250k mortgage I need to put some down, usually 20% of the appraised value (or less but then the interest is usually higher) - which is about $50k. If I invest $50k in a simple interest bearing account at 4.5% the future value of my investment after those 30 years will be over $3million (due to compound interest.) I think I will be very lucky to sell my $250k house for $3 million in 30 years.
Second, there are selling and buying cost. Assuming that under the best case scenario I will be able to sell my house for $3 million, about 6% or 180k of it will go to real estate brokers.
Third, there are maintenance costs that are included in my carrying charges, but they are extra for individual homeowners. Assuming those costs to be on average $5k per year, the individual home owner will have shelled and additional $150k in 30 years. However, I the renter, could invest that $5k at 4.5% interest rate, thus obtaining the payoff of nearly $3.8 million (that compound interest again!) at the end of the 30 year period.
So let's now do the math: I as a coop renter: (352k) - paid in carrying charges over 30 years 3,000 - payoff from my $50k investment (saved on downpayment) (50k) - original investment 3,750k payoff on $5k per year saved on maintenance costs 6,348k - money on my hand after the 30 year period is up. That is $6.3 million.
I as an individual home owner (558k) - paid in monthly installments (@1,550 a month) 12k - $400year tax credit over 30 years (150k) - maintenance cost (@$5k per annum) 3,000k - future value of my home (50k) - original investment (180k) - commission/selling cost 2,074k - money on my hand after the 30 year period is up. That is $2.1 million.
So to conclude - I end up with $6.3 million if I stayed in my coop without taking much risk, and $2.1 million if I bought a house @250k credit and got lucky selling it for $3m in 30 years. Guess what, I will keep renting.
Wojtek