Buying a house for a shorter term
To answer your question, you need to ask yourself  Common transaction costs can be really hard to compensate in a single year. It can include house inspections, closing costs, agents commissions, etc---all together, it can be up to 6-10% of the value of your house. This is a difficult goal to beat in a year, and your margin for miscalculations and market fluctuations is very low. In brief, you can be screwed big time. To make a profit in a year, you need to reduce transaction costs to the minimum: Avoid agents, inspectors, mortgage brokers, etc, which can pay you back with an interesting surprise. Bottom line, it can make sense to buy a house for a year, only if you can reduce all the related transaction costs by doing them yourself. If there are many houses in the market for sale, I would try to convince someone to lease the house for a year in the best terms possible (and maybe even try to sub-lease some of the rooms), or also rent-to-own the house. That way you avoid the transaction costs upfront, and would make more financial sense for a non real estate guru. If there are a lot of houses for sale, can you be sure that in a year or two you can sell yours? How long does the average house in that area stay on the market before it is sold? What percentage of houses never get sold?  If it can't be sold due to the crowded market you will be forced to rent the house. The question for you then is how much rental income can you get? Compare the rental income to your monthly cost of owning, and managing the house.  One benefit to buying a house in a market that is easy to rent a house would be if you are forced to move quickly, then you aren't stuck being 3 months into a 12 month lease.  Keep in mind that markets can change rather dramatically in just a few years. Housing costs were flat for much of the 90's, then rocketed up in the first half of the last decade, and after a big drop, they are one a slow climb back up. But the actual path they are on depends on the part of the US you are in.  The rule of thumb in the past was based on the fact that over a few years the price would rise enough overcome the closing costs on the two transactions. Unfortunately the slow growth in the 90's meant that many had to bring checks to closing because the equity gained wasn't enough to overcome the closing costs due to low down payment loans.   The fast growth period meant that people got into exotic loans to maximize the potential income when prices were going up 10-20% a year.  When prices dropped some found that they bought houses they couldn't afford, but couldn't sell to break even on the transaction. They were stuck and had to default on the mortgage.  In fact I have never seen a time frame when the rule of thumb ever applied. There are two main factors at play to consider.   Also, realize that no advice is universal. You need to evaluate your exact situation and do what is best for you. When on this topic, you'll often hear general rules of thumb. And, similar to the 'only buy stocks if you plan to hold more than X years' there are going to be periods where if you buy at a bottom right before the market turns up, you might be ahead just months after you buy. I'd say that if you buy right, below market, you're ahead the day you close.  Edit - I maintain, and have Schiller providing supporting data) that real estate goes up with inflation in the long term, no more, no less. If the rise were perfectly smooth, correlated 100% month to month, you'd find it would take X years to break even to the costs of buying, commission and closing costs. If we call that cost about 8%, and inflation averages 3, it points to a 3 year holding period to break even. But, since real estate rises and falls in the short term, there are periods longer than 4 years where real estate lags, and very short periods where it rises faster than the costs involved.  The buy vs rent is a layer right on top of this. If you happen upon a time when the rental market is tight, you may buy, see the house decline 10% in value, and when the math is done, actually be ahead of the guy that rented.
I sold my house and had been in the market looking for a replacement house for over 6 months after I sold it. I found someone willing to give me a short term, 3 month lease, with a month to month after that, at an equitable rate, as renters were scarcer than buyers.By the time I found a house, there were bidding wars as surplus had declined (can be caused seasonally), and it was quite difficult to get my new house. However, appraisers help this to a degree because whatever the seller wants, is not necessarily what they get, even if you offer it. I offered $10k over asking just to get picked out of the large group bidding on the house. Once the appraisal came in at $10k below my offer, I was able to buy the house at what I expected. Of course I had to be prepared if it came in higher, but I did my homework and knew pretty much what the house was worth. The mortgage is the same as the lease I had, the house is only 10 years' old and has a 1 year warranty on large items that could go wrong. In the 3 months I've been in the house, I have gained nearly $8k in equity....and will have a tax writeoff of about $19,000 off an income off a salary of $72,000, giving me taxable income of $53,000... making by tax liability go down about $4600. If I am claiming 0 dependents I will get back about $5,000 this year versus breaking even. "Let's look at basics. Your 340K mortgage amortized over 25 years at 3.5% is going to cost you $1700 in payments - almost exactly your rent. You won't be paying out less. You will in fact be paying out more, because you are now liable for more insurance, and any repairs will have to be paid for by you, not the landlord. So don't do this to save money. Figures from here. Don't forget that it is extremely likely that interest rates will go up in the next few years. 7% is not unlikely. Can you afford it if your payments double? You can get a fixed rate mortgage, but they are going to cost you much more than 3.5% for more than a couple of years. Don't be fooled by the 'pay yourself' argument for getting a mortgage. in the first few years almost all of your payments is interest, not paying down the principal. You are just switching from paying a landlord to paying a bank. There are huge advantages to waiting until you have a good down payment before buying a house. People with a big down payment get better interest rates, and don't need to pay as much CMHC insurance. You will be less at risk if the price of your house drops. Also ask yourself if you are sure you will be in your house for five years - if not, even real estate agents would usually admit you shouldn't buy. The truck payment shouldn't be an issue, as long as you are sure you can service both truck and mortgage payments. Nor is $600 in credit card debt significant in the big scheme. I would probably put any spare cash towards a down payment. It reduces your interest rate (possibly), some expenses with regard to your mortgage, and your risk if you have to sell and your house value has dropped.  You might like to look at the government of Canada website ""Rent or buy"". It's down right now so I can't give you a link. I'll edit it in when it's back up. EDIT:Turns out it's offline for 'updating'. Here's the link." You may be in a situation where buying is preferred, especially because you can enter the market in a strong position - with a 20% down payment.  If you have the financial ability to assume the risk of owning, you may be better off.  I would consider two things.  Renting is purchasing a service. You are buying the flexibility to move with minimum hassle and the landlord is assuming the risk of owning the asset (property). They will make money on you, like any service provider. Buying is purchasing an asset. You are buying the underlying asset and assume all the risks associated with it. This is large, unforeseen maintenance, fees, taxes, depreciation, etc... Some of these risks were passed to you as a renter, but some were not.  Just like purchasing $400k in stock, if you have to sell when the market is down, you lose big. You win if you can hold. Unlike a stock, real estate will eat your cash in taxes and repairs unless it is rented. If you are willing to be a long-distance landlord, this may work out. Understand that property management fees will eat into your rent income and being long-distance will give more potential for a bad tenant to ruin your property value. These and other factors (e.g. vacancy rate) will increase your risk of loss and should be considered. Some of this will be your preference, since you will spend much more time dealing with buying/selling/property management as opposed to a more clean rental situation. Is this hassle worth the savings? For many, yes; others, no. Finally, I hope this calculator can help clarify some of the financial aspects for you.  http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?_r=0 Good Luck! Besides the long-term concern about which is cheaper, which has already been addressed by other answers, consider your risk exposure. Owning property has financial risks associated with it, just like owning stocks or bonds. The risk-related downsides of owning a home as an asset include: The risk-related upsides of owning a home as an asset include: Taking on some risk can save you (or earn you) money in the long run (that's why people buy risky stocks, after all) but consider how well you're equipped to handle that risk before you rush out to buy on a naive analysis of what's cheaper. the total principal is also dropping - you mean you're paying it down, right? All else the same, if you found a house whose payments are less than rent, and planned to stay long term, buying can make sense. But let's not forget the other costs and risks. How badly do you want to be a homeowner? Adding image from another post here:  This shows that housing prices have fallen below the long term trend line and equilibrium level. "I second DJClayworth's suggestion to wait and save a larger down-payment.  I'll also add: It looks like you neglected to consider CMHC insurance in your calculation.  When you buy your first home with less than 20% down, the bank will require you to insure the mortgage. CMHC insurance protects the bank if you default – it does not protect you.  But such insurance does make a bank feel better about lending money to people it otherwise wouldn't take a chance on. The kicker is you would be responsible for paying the CMHC insurance that's protecting the bank.  The premium is usually added on to the amount borrowed, since a buyer requiring CMHC insurance doesn't, by definition, have enough money up front.  The standard CMHC premium for a mortgage with 5% down, or as they would say a ""95% Loan-to-Value ratio"" is 2.75%.  Refer to CMHC's table of premiums here. So, if you had a down-payment of $17,000 to borrow a remaining $323,000 from the bank to buy a $340,000 property, the money you owe the bank would be $331,883 due to the added 2.75% CMHC insurance premium. This added $8883, plus interest, obviously makes the case for buying less compelling.  Then, are there other closing costs that haven't been fully considered? One more thing I ought to mention: Have you considered saving a larger down-payment by using an RRSP?  There's a significant advantage doing it that way: You can save pre-tax dollars for your down-payment. When it comes time to buy, you'd take advantage of the Home Buyer's Plan (HBP) and get a tax-free loan of your own money from your RRSP. You'd have 15 years to put the money back into your RRSP. Last, after saving a larger downpayment, if you're lucky you may find houses not as expensive when you're ready to buy.  I acknowledge this is a speculative statement, and there's a chance houses may actually be more expensive, but there is mounting evidence and opinion that real estate is currently over-valued in Canada.  Read here, here, and here." "First off; I don't know of the nature of the interpersonal relationship between you and your roommate, and I don't really care, but I will say that your use of that term was a red flag to me, and it will be so to a bank; buying a home is a big deal that you normally do not undertake with just a ""friend"" or ""roommate"". ""Spouses"", ""business partners"", ""domestic partners"" etc are the types of people that go in together on a home purchase, not ""roommates"". Going ""halvsies"" on a house is not something that's easily contracted; you can't take out two primary mortgages for half the house's value each, because you can't split the house in half, so if one of you defaults that bank takes the house leaving both the other person and their bank in the lurch. Co-signing on one mortgage is possible but then you tie your credit histories together; if one of you can't make their half of the mortgage, both of you can be pursued for the full amount and both of you will see your credit tank. That's not as big a problem for two people joined in some other way (marriage/family ties) but for two ""friends"" there's just way too much risk involved. Second, I don't know what it's like in your market, but when I was buying my first house I learned very quickly that extended haggling is not really tolerated in the housing market. You're not bidding on some trade good the guy bought wholesale for fifty cents and is charging you $10 for; the seller MIGHT be breaking even on this thing. An offer that comes in low is more likely to be rejected outright as frivolous than to be countered. It's a fine line; if you offer a few hundred less than list the seller will think you're nitpicking and stay firm, while if you offer significantly less, the seller may be unable to accept that price because it means he no longer has the cash to close on his new home. REOs and bank-owned properties are often sold at a concrete asking price; the bank will not even respond to anything less, and usually will not even agree to eat closing costs. Even if it's for sale by owner, the owner may be in trouble on their own mortgage, and if they agree to a short sale and the bank gets wind (it's trivial to match a list of distressed mortgaged properties with the MLS listings), the bank can swoop in, foreclose the mortgage, take the property and kill the deal (they're the primary lienholder; you don't ""own"" your house until it's paid for), and then everybody loses. Third, housing prices in this economy, depending on market, are pretty depressed and have been for years; if you're selling right now, you are almost certainly losing thousands of dollars in cash and/or equity. Despite that, sellers, in listing their home, must offer an attractive price for the market, and so they are in the unenviable position of pricing based on what they can afford to lose. That again often means that even a seller who isn't a bank and isn't in mortgage trouble may still be losing thousands on the deal and is firm on the asking price to staunch the bleeding. Your agent can see the signs of a seller backed against a wall, and again in order for your offer to be considered in such a situation it has to be damn close to list. As far as your agent trying to talk you into offering the asking price, there's honestly not much in it for him to tell you to bid higher vs lower. A $10,000 change in price (which can easily make or break a deal) is only worth $300 to him either way. There is, on the other hand, a huge incentive for him to close the deal at any price that's in the ballpark: whether it's $365k or $375k, he's taking home around $11k in commission, so he's going to recommend an offer that will be seriously considered (from the previous points, that's going to be the asking price right now). The agent's exact motivations for advising you to offer list depend on the exact circumstances, typically centering around the time the house has been on the market and the offer history, which he has access to via his fellow agents and the MLS. The house may have just had a price drop that brings it below comparables, meaning the asking price is a great deal and will attract other offers, meaning you need to move fast. The house may have been offered on at a lower price which the seller is considering (not accepted not rejected), meaning an offer at list price will get you the house, again if you move fast. Or, the house may have been on the market for a while without a price drop, meaning the seller can go no lower but is desperate, again meaning an offer at list will get you the house. Here's a tip: virtually all offers include a ""buyer's option"". For a negotiated price (typically very small, like $100), from the moment the offer is accepted until a particular time thereafter (one week, two weeks, etc) you can say no at any time, for any reason. During this time period, you get a home inspection, and have a guy you trust look at the bones of the house, check the basic systems, and look for things that are wrong that will be expensive to fix. Never make an offer without this option written in. If your agent says to forego the option, fire him. If the seller wants you to strike the option clause, refuse, and that should be a HUGE red flag that you should rescind the offer entirely; the seller is likely trying to get rid of a house with serious issues and doesn't want a competent inspector telling you to lace up your running shoes. Another tip: depending on the pricepoint, the seller may be expecting to pay closing costs. Those are traditionally the buyer's responsibility along with the buyer's agent commission, but in the current economy, in the pricepoint for your market that attracts ""first-time homebuyers"", sellers are virtually expected to pay both of those buyer costs, because they're attracting buyers who can just barely scrape the down payment together. $375k in my home region (DFW) is a bit high to expect such a concession for that reason (usually those types of offers come in for homes at around the $100-$150k range here), but in the overall market conditions, you have a good chance of getting the seller to accept that concession if you pay list. But, that is usually an offer made up front, not a weapon kept in reserve, so I would have expected your agent to recommend that combined offer up front; list price and seller pays closing. If you offer at list you don't expect a counter, so you wouldn't keep closing costs as a card to play in that situation." Save up a bigger downpayment.  The lender's requirement is going to be based on how much you finance, not the price of the house. I don't know any clever way to do what you're describing.  And, in a sense, you can see why there might not be one.  A mortgage isn't just a magical way to reduce your housing expenses; it's a tradeoff in which you agree to a long-term commitment in exchange for fixed costs (or at least costs with a prearranged structure) over that long term.  If you're unwilling to accept the obligation of paying for and maintaining the property over a long period, you can't really expect to reap the benefits of lowered costs.  Part of the reason people say buying is better is because people often do live in the same place for a long time, in which case, if they rent, they might miss out on savings they could have had if they bought instead.  If you're not going to live in the same place for a long time, buying may not actually be better for you. First consider the basic case of what you are asking: you expect to have a future obligation to pay interest, and you are concerned that the rate when you pay it, will be higher than the rate today. In the simplest case, you could theoretically hedge that risk by buying an asset which pays the market interest rate. As the interest rate rises, increasing your costs, your return on this asset would also increase. This would minimize your exposure to interest rate fluctuations. There are of course two problems with this simplified solution:  (1) The reason you expect to pay interest, is because you need/want to take on debt to purchase your house. To fully offset this risk by putting all your money in an asset which bears the market interest rate, would effectively be the same as just buying your house in cash. (2) The timing of the future outflow is a bit unique: you will be locking in a rate, in 5 years, which will determine the payments for the 5 years after that. So unless you own this interest-paying asset for that whole future duration, you won't immediately benefit. You also won't need / want to buy that asset today, because the rates from today to 2022 are largely irrelevant to you - you want something that directly goes against the prevailing mortgage interest rate in 2022 precisely. So in your specific case, you could in theory consider the following solution: You could short a coupon bond, likely one with a 10 year maturity date from today. As interest rates rise, the value of the coupon bond [for it's remaining life of 5 years], which has an implied interest rate set today, will drop. Because you will have shorted an asset dropping in value, you will have a gain. You could then close your short position when you buy your house in 5 years. In theory, your gain at that moment in time, would equal the present value of the rate differential between today's low mortgage rates and tomorrow's high interest rates. There are different ways mechanically to achieve what I mention above (such as buying forward derivative contracts based on interest rates, etc.), but all methods will have a few important caveats: (1) These will not be perfect hedges against your mortgage rates, unless the product directly relates to mortgage rates. General interest rates will only be a proxy for mortgage rates. (2) There is additional risk in taking this type of position. Taking a short position / trading on a margin requires you to make ongoing payments to the broker in the event that your position loses money. Theoretically those losses would be offset by inherent gains in the future, if mortgage rates stay low / go lower, but that offset isn't in your plan for 5 years. (3) 5 years may be too long of a timeline for you to accurately time the maturity of your 'hedge' position. If you end up moving in 7 years, then changes in rates between 2022-2024 might mean you lose on both your 'hedge' position and your mortgage rates. (4) Taking on a position like this will tie up your capital - either because you are directly buying an asset you believe will offset growing interest rates, or because you are taking on a margin account for a short position (preventing you from using a margin account for other investments, to the extent you 'max out' your margin limit). I doubt any of these solutions will be desirable to an individual looking to mitigate interest rate risk, because of the additional risks it creates, but it may help you see this idea in another light. First, some general advice that I think you should consider A good rule of thumb on home buying is to wait to buy until you expect to live in the same place for at least 5 years. This period of time is meant to reduce the impact of closing costs, which can be 1-5% of your total buying & selling price. If you bought and sold in the same year, for example, then you might need to pay over 5% of the value of your home to realtors & lawyers! This means that for many people, it is unwise to buy a home expecting it to be your 'starter' home, if you already are thinking about what your next (presumably bigger) home will look like. If you buy a townhouse expecting to sell it in 3 years to buy a house, you are partially gambling on the chance that increases in your townhome's value will offset the closing costs & mortgage interest paid. Increases in home value are not a sure thing. In many areas, the total costs of home ownership are about equivalent to the total costs of renting, when you factor in maintenance. I notice you don't even mention renting as an option - make sure you at least consider it, before deciding to buy! Also, don't buy a house expecting your life situation to 'make up the difference' in your budget. If you're expecting your girlfriend to move in with you in a year, that implies that you aren't living together now, and maybe haven't talked about it. Even if she says now that she would move in within a year, there's no guarantee that things work out that way. Taking on a mortgage is a commitment that you need to take on yourself; no one else will be liable for the payments. As for whether a townhouse or a detached house helps you meet your needs better, don't get caught up in terminology. There are few differences between houses & townhomes that are universal. Stereotypically townhomes are cheaper, smaller, noisier, and have condo associations with monthly fees to pay for maintenance on joint property. But that is something that differs on a case-by-case basis. Don't get tricked into buying a 1,100 sq ft house with a restrictive HOA, instead of a 1,400 sq ft free-hold townhouse, just because townhouses have a certain reputation. The only true difference between a house and a townhouse is that 1 or both of your walls are shared with a neighbor. Everything else is flexible. If you do the financing, get a large down payment and make a short loan.  Do not expose yourself to risk with a 30 year note, and get some major money up front so the buyer has some skin in the game and will continue to make payments. Buying a house may save you money compared with renting, depending on the area and specifics of the transaction (including the purchase price, interest rates, comparable rent, etc.). In addition, buying a house may provide you with intangibles that fit your lifestyle goals (permanence in a community, ability to renovate, pride of ownership, etc.). These factors have been discussed in other answers here and in other questions. However there is one other way I think potential home buyers should consider the financial impact of home ownership: Buying a house provides you with a natural 'hedge' against possible future changes in your cost of living. Assume the following: If these two items are true, then buying a home allows you to guarantee today that your monthly living expenses will be mostly* fixed, as long as you live in that community. In 2 years, if there is an explosion of new residents in your community and housing costs skyrocket - doesn't affect you, your mortgage payment [or if you paid cash, the lack of mortgage payment] is fixed. In 3 years, if there are 20 new apartment buildings built beside you and housing costs plummet - doesn't affect you, your mortgage payment is fixed. If you know that you want to live in a particular place 20 years from now, then buying a house in that area today may be a way of ensuring that you can afford to live there in the future. *Remember that while your mortgage payment will be fixed, other costs of home ownership will be variable. See below. You may or may not save money compared with rent over the period you live in your house, but by putting your money into a house, you have protected yourself against catastrophic rent increases. What is the cost of hedging yourself against this risk? (A) The known costs of ownership [closing costs on purchase, mortgage interest, property tax, condo fees, home insurance, etc.]; (B) The unknown costs of ownership [annual and periodic maintenance, closing costs on a future sale, etc.]; (C) The potential earnings lost on your down payment / mortgage principal payments [whether it is low-risk interest or higher risk equity]; (D) You may have reduced savings for a long period of time which would limit your ability to cover emergencies (such as medical costs, unexpected unemployment, etc.) (E) You may have a reduced ability to look for a better job based on being locked into a particular location (though I have assumed above that you want to live in a particular community for an extended period of time, that desire may change); and (F) You can't reap the benefits of a rental market that decreases in real dollars, if that happens in your market over time. In short, purchasing a home should be a lifestyle-motivated decision. It financially reduces some the fluctuation in your long-term living costs, with the trade-off of committed principal dollars and additional ownership risks including limited mobility. When you sell a house around between 7-10% of the sales price will go to various fees. Mostly to the agents, but also to county fees, city fees, deed tax, and possibly covering closing costs for the buyers. So if you sell a $400k house for the same price you buy, just in fees, you're out $40k. Mortgages are structured so that the frontend is very interest heavy, while at the end you're mostly paying towards principal. So for the first two years you will pay down very little of the principal. Figure around $2500 for the mortgage, and without running the numbers I bet you would pay an average for the first two years of around $1800/month in interest. $43,200. Mortgage interest is tax deductible, so you'll get some of that back. That's also $16,800 in equity you'll have on the house, so you'll get that back out when you sell. Rough numbers, I would be you lose around $50k buying the house and selling for the same price two years later. That doesn't take into account having to do any maintenance. And it assumes you can sell quickly when you want to. Renting is not throwing away money. You don't lose any money. You get a place to live in exchange. You don't build equity, sure, but you don't need to worry about maintenance and other related issues. When you're looking to be somewhere short term renting is generally the best idea. If they charge a fee to accept an item, it's reasonable to assume the item has insignificant value, so the only tax-deductible bit would be the money you donated to their charity. What you describe sounds like a fee for service, not a charitable donation. The organization should provide a fee breakdown to show what percentage (if any) of the fee is a deductible contribution. There could be some additional PA-only tax benefit, but I didn't come across anything in my brief search.