You're sort of changing the discussion mid-stream...you first say that owning in a paid off home is always cheaper (which is not necessarily true)... and then once we point out that you are ignoring opportunity costs you change it up to make it a mortgaged home... which is it going to be? And then you make it a VA loan which very few are eligible for! More obfuscation!
IF one can find a situation where you can own for 0% down and your PITI is the same as rent for similar property of course owning is better... its the same cash outflows but building some equity with mortgage principal payments.... but alas, there are very few markets in the US where PITI and rent are the same for similar properties.... usually PITI is substantially more... if it were the same then no one who expects to remain in the same area for more than a few years would bother to rent.
That and it is hard to find those elusive 0% down loans.
Show me a realistic scenario where renting for 50 years is more cost advantageous (starting with $0, or a 20% down payment if you'd really like) for an average priced home. Don't forget to include the fact that PI doesn't go up while rent does in your calculations. Or better yet, I'll show you some..
I've done some the research:
Median Gross Rent $959
For 2015
Residential Rent Statistics for the United States | Department of Numbers
For now, let's ignore that the average rent is significantly inferior to the average home purchase in size and, often, location.
Median new home price Nov 2015 $312,600
Median existing home price 30, 2015 $220,000.0
https://ycharts.com/indicators/sales_price_of_existing_homes
https://ycharts.com/indicators/sales_price_of_existing_homes
Per the census bureau, there's typically ~1 new home sale per 10 existing home sales so we'll use a 10x weighting on existing homes vs new homes and get a fictional home price of ~$228k.
Nov 2015 mortgage rates
https://www.totalmortgage.com/blog/...rtgage-rates-for-friday-november-6-2015/30408
average rate on a 30-year fixed-rate mortgage to be 3.87%, up from 3.76% the week prior.
A mortgage on that fictional home, using those rates, would be $1,071/month. Plus an average home insurance + property taxes would put that around $1,300/month. This gives the renter a $341/month advantage. If putting 20% down, however, the PI goes to $857 but we'll leave TI the same at $229/month for a total of $1,086/month.
1913-2013 inflation rate
As we saw the Average annual inflation rate is 3.22%.
Let's use historic market returns (S&P 500) for calculating how much opportunity each is given (renter while his is cheaper, buyer when his becomes cheaper). Let's use 1913-2013 for consistency and not forget to adjust for inflation and include dividend reinvestment, which gives us an average return of 6.35%.
https://dqydj.com/sp-500-return-calculator/
So, in the tables below, the "negative" difference is "renter has this much more that year" and the positive difference is "owner has that much more".
Year | Rent | PI – 0% down | TI – 0% down | Difference 0% down | PI 20% down | Renter Investment 0% down) | Owner Investment 0% down | Difference 20% down | Renter Investment 0% down) | Owner Investment 20% down |
1 | $11,508.00 | $12,372.00 | $2,748.00 | -$3,612.00 | $10,284.00 | $3,612.00 | | -$1,524.00 | $41,524.00 | |
2 | $11,878.56 | $12,372.00 | $2,836.49 | -$3,329.93 | $10,284.00 | $7,171.29 | | -$1,241.93 | $45,402.70 | |
3 | $12,261.05 | $12,372.00 | $2,927.82 | -$3,038.77 | $10,284.00 | $10,665.44 | | -$950.77 | $49,236.55 | |
4 | $12,655.85 | $12,372.00 | $3,022.10 | -$2,738.24 | $10,284.00 | $14,080.94 | | -$650.24 | $53,013.31 | |
5 | $13,063.37 | $12,372.00 | $3,119.41 | -$2,428.04 | $10,284.00 | $17,403.12 | | -$340.04 | $56,719.69 | |
6 | $13,484.01 | $12,372.00 | $3,219.85 | -$2,107.84 | $10,284.00 | $20,616.05 | | -$19.84 | $60,341.23 | |
7 | $13,918.20 | $12,372.00 | $3,323.53 | -$1,777.33 | $10,284.00 | $23,702.51 | | $310.67 | $64,172.90 | $310.67 |
8 | $14,366.36 | $12,372.00 | $3,430.55 | -$1,436.19 | $10,284.00 | $26,643.80 | | $651.81 | $68,247.88 | $982.21 |
9 | $14,828.96 | $12,372.00 | $3,541.01 | -$1,084.05 | $10,284.00 | $29,419.74 | | $1,003.95 | $72,581.62 | $2,048.52 |
10 | $15,306.45 | $12,372.00 | $3,655.03 | -$720.58 | $10,284.00 | $32,008.47 | | $1,367.42 | $77,190.56 | $3,546.02 |
11 | $15,799.32 | $12,372.00 | $3,772.73 | -$345.41 | $10,284.00 | $34,386.42 | | $1,742.59 | $82,092.16 | $5,513.79 |
12 | $16,308.06 | $12,372.00 | $3,894.21 | $41.85 | $10,284.00 | $36,569.96 | $41.85 | $2,129.85 | $87,305.01 | $7,993.76 |
13 | $16,833.18 | $12,372.00 | $4,019.60 | $441.58 | $10,284.00 | $38,892.15 | $486.08 | $2,529.58 | $92,848.88 | $11,030.94 |
14 | $17,375.21 | $12,372.00 | $4,149.03 | $854.17 | $10,284.00 | $41,361.80 | $1,371.12 | $2,942.17 | $98,744.78 | $14,673.58 |
15 | $17,934.69 | $12,372.00 | $4,282.63 | $1,280.06 | $10,284.00 | $43,988.27 | $2,738.25 | $3,368.06 | $105,015.07 | $18,973.41 |
16 | $18,512.18 | $12,372.00 | $4,420.53 | $1,719.65 | $10,284.00 | $46,781.53 | $4,631.78 | $3,807.65 | $111,683.53 | $23,985.88 |
17 | $19,108.28 | $12,372.00 | $4,562.87 | $2,173.40 | $10,284.00 | $49,752.16 | $7,099.30 | $4,261.40 | $118,775.43 | $29,770.38 |
18 | $19,723.56 | $12,372.00 | $4,709.80 | $2,641.77 | $10,284.00 | $52,911.42 | $10,191.87 | $4,729.77 | $126,317.67 | $36,390.57 |
19 | $20,358.66 | $12,372.00 | $4,861.45 | $3,125.21 | $10,284.00 | $56,271.29 | $13,964.26 | $5,213.21 | $134,338.85 | $43,914.58 |
20 | $21,014.21 | $12,372.00 | $5,017.99 | $3,624.22 | $10,284.00 | $59,844.52 | $18,475.21 | $5,712.22 | $142,869.36 | $52,415.37 |
21 | $21,690.87 | $12,372.00 | $5,179.57 | $4,139.30 | $10,284.00 | $63,644.65 | $23,787.69 | $6,227.30 | $151,941.57 | $61,971.05 |
22 | $22,389.31 | $12,372.00 | $5,346.35 | $4,670.96 | $10,284.00 | $67,686.08 | $29,969.17 | $6,758.96 | $161,589.86 | $72,665.17 |
23 | $23,110.25 | $12,372.00 | $5,518.51 | $5,219.74 | $10,284.00 | $71,984.15 | $37,091.95 | $7,307.74 | $171,850.81 | $84,587.15 |
24 | $23,854.40 | $12,372.00 | $5,696.20 | $5,786.20 | $10,284.00 | $76,555.14 | $45,233.49 | $7,874.20 | $182,763.34 | $97,832.64 |
25 | $24,622.51 | $12,372.00 | $5,879.62 | $6,370.89 | $10,284.00 | $81,416.39 | $54,476.71 | $8,458.89 | $194,368.81 | $112,503.90 |
26 | $25,415.36 | $12,372.00 | $6,068.94 | $6,974.41 | $10,284.00 | $86,586.33 | $64,910.40 | $9,062.41 | $206,711.23 | $128,710.31 |
27 | $26,233.73 | $12,372.00 | $6,264.36 | $7,597.37 | $10,284.00 | $92,084.57 | $76,629.57 | $9,685.37 | $219,837.39 | $146,568.79 |
28 | $27,078.46 | $12,372.00 | $6,466.08 | $8,240.38 | $10,284.00 | $97,931.94 | $89,735.93 | $10,328.38 | $233,797.07 | $166,204.29 |
29 | $27,950.38 | $12,372.00 | $6,674.28 | $8,904.10 | $10,284.00 | $104,150.61 | $104,338.27 | $10,992.10 | $248,643.18 | $187,750.36 |
30 | $28,850.39 | $12,372.00 | $6,889.20 | $9,589.19 | $10,284.00 | $110,764.18 | $120,552.94 | $11,677.19 | $264,432.02 | $211,349.70 |
31 | $29,779.37 | | $7,111.03 | $22,668.34 | | $117,797.70 | $150,876.39 | $22,668.34 | $281,223.46 | $247,438.75 |
32 | $30,738.26 | | $7,340.00 | $23,398.26 | | $125,277.86 | $183,855.30 | $23,398.26 | $299,081.15 | $286,549.37 |
33 | $31,728.04 | | $7,576.35 | $24,151.69 | | $133,233.00 | $219,681.80 | $24,151.69 | $318,072.80 | $328,896.94 |
34 | $32,749.68 | | $7,820.31 | $24,929.37 | | $141,693.30 | $258,560.97 | $24,929.37 | $338,270.42 | $374,711.26 |
35 | $33,804.22 | | $8,072.12 | $25,732.10 | | $150,690.82 | $300,711.69 | $25,732.10 | $359,750.59 | $424,237.53 |
36 | $34,892.72 | | $8,332.05 | $26,560.67 | | $160,259.69 | $346,367.55 | $26,560.67 | $382,594.76 | $477,737.28 |
37 | $36,016.26 | | $8,600.34 | $27,415.92 | | $170,436.18 | $395,777.81 | $27,415.92 | $406,889.52 | $535,489.52 |
38 | $37,175.98 | | $8,877.27 | $28,298.72 | | $181,258.88 | $449,208.42 | $28,298.72 | $432,727.01 | $597,791.82 |
39 | $38,373.05 | | $9,163.12 | $29,209.93 | | $192,768.81 | $506,943.09 | $29,209.93 | $460,205.17 | $664,961.54 |
40 | $39,608.66 | | $9,458.17 | $30,150.49 | | $205,009.63 | $569,284.47 | $30,150.49 | $489,428.20 | $737,337.09 |
41 | $40,884.06 | | $9,762.72 | $31,121.34 | | $218,027.75 | $636,555.37 | $31,121.34 | $520,506.89 | $815,279.33 |
42 | $42,200.53 | | $10,077.08 | $32,123.45 | | $231,872.51 | $709,100.08 | $32,123.45 | $553,559.08 | $899,173.02 |
43 | $43,559.39 | | $10,401.56 | $33,157.82 | | $246,596.41 | $787,285.76 | $33,157.82 | $588,710.08 | $989,428.33 |
44 | $44,962.00 | | $10,736.49 | $34,225.50 | | $262,255.28 | $871,503.91 | $34,225.50 | $626,093.17 | $1,086,482.53 |
45 | $46,409.77 | | $11,082.21 | $35,327.57 | | $278,908.49 | $962,171.98 | $35,327.57 | $665,850.09 | $1,190,801.74 |
46 | $47,904.17 | | $11,439.06 | $36,465.11 | | $296,619.18 | $1,059,735.01 | $36,465.11 | $708,131.57 | $1,302,882.76 |
47 | $49,446.68 | | $11,807.39 | $37,639.29 | | $315,454.50 | $1,164,667.47 | $37,639.29 | $753,097.92 | $1,423,255.11 |
48 | $51,038.87 | | $12,187.59 | $38,851.28 | | $335,485.86 | $1,277,475.13 | $38,851.28 | $800,919.64 | $1,552,483.08 |
49 | $52,682.32 | | $12,580.03 | $40,102.29 | | $356,789.21 | $1,398,697.09 | $40,102.29 | $851,778.04 | $1,691,168.04 |
50 | $54,378.69 | | $12,985.11 | $41,393.58 | | $379,445.33 | $1,528,907.94 | $41,393.58 | $905,865.95 | $1,839,950.79 |
| | | | | | | | | | |
Note: despite having the renter have a (on average) smaller place etc thus keeping their costs down, by year 29 in the 0% down scenario, the owner is ahead including investments. It takes until year 33 in the 20% category for the owner to overtake the renter. By year 50, the owner has twice as much money in investments than the guy who's still paying rent despite putting 20% down (which is the best scenario for the renter with the 0% down scenario having the owner with almost 5x as much money). In each scenario, inflation catches up to the rental price relatively quickly and paying off the home puts a MASSIVE increase in the relative ability to sock money away for the homeowner.
I could rerun the numbers to show how vastly superior the end result is for the person with the lower rate, but higher payment, 15 year loan, but I imagine anyone here could figure that out without the need to see those numbers...