The Math isn’t Mathing
The Numbers Behind Buying Your Second Home First
A recent Bankrate study showed that renting is now more affordable than buying in all 50 of the largest U.S. metros. My New York City apartment is proof of that. Let’s take a look:
A real life NYC example
We currently pay $3,995 a month for a 2 bed, 2 bath duplex, 1600 sq. ft. apartment with an oversized basement that doubles as a bedroom and a playroom (and an office… and a workout space… and a laundry room… and a podcast studio—this is NYC after all, the king of dual purpose spaces!). Whether that feels expensive or cheap, let’s look at what a comparable space would sell for.
Zillow currently shows the lowest price for a similar footprint in my neighborhood as $925,000. Truthfully, that price is if you found a screamin’ deal and didn’t mind doing a LOT of renovating, but let’s go with it to see how it compares to my rent:
To put 20% down, I would need $185,000. If I had great credit and my lender was open to a smaller downpayment (as little as 5% - 10%), that amount could be reduced to between $46,250 and $92,500.
For a purchase price of $925,000, Bank of America calculates closing costs to be approximately $36,746.
Now for the monthly payment. With 20% down, we’re looking at $5,758 per month—that's $1,763 more than my rent, or $21,156 more annually.
When you drop the down payment to 5%, that monthly payment increases to $7,252! That would be $3,297 a month more than what I’m paying to rent, or $39,084 per year!
Plus, as a homeowner, you have the joy and financial burden of household repairs. One commonly cited rule is to set aside 1% of your home's purchase price annually for maintenance and repairs—in this case: $9,250. For renters, that cost is borne by the landlord.
So let’s look at how the numbers break down:
In that first year, between laying out the down payment and covering the closing costs, you could be spending as much as a quarter of a million dollars MORE than just paying rent.
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*The content shared on Second Home First is for educational and informational purposes only. Please consult a licensed financial advisor before making any investment or financial decisions.