Rent Versus Buy Calculator
Should you rent or should you buy your home? It takes more than looking at your mortgage
payment to answer this question. This calculator helps you weed through the fees,
taxes, and monthly payments to help you make a good financial decision. Click the
"View Report" button for a detailed look at the results.
- Price of home
- Purchase price
of the home you wish to buy.
- Cash on hand
- Cash you have
for the down payment and closing costs.
- Interest rate
- The current interest
rate you can receive on your mortgage.
- Term in years
- The number of
years over which you will repay this loan.
- Property tax
- Your property
tax rate. 1% for a $100,000 home equals $1,000 per year in property taxes.
- Home insurance
- Your homeowner's
insurance rate. 0.5% for a $100,000 home equals $500 per year for homeowner's insurance.
- Loan origination
- The percentage
the lending institution charges for its origination fee. 1% for a $100,000 home
- Points paid
- The total number
of points paid to reduce the interest rate of your mortgage. Each point costs 1%
of your mortgage balance.
- Other closing
- Estimate of all
other closing costs for this loan. This should include filing fees, appraiser fees
and any other miscellaneous fees paid.
- Total closing
- Total upfront
costs to close your loan. This is the sum of the loan origination fee, amount paid
for points and other closing costs.
- Total for
- Total funds remaining
for down payment.
- Mortgage amount
- Total amount
- The rate of return
you could receive if you invested your closing costs and down payment instead of
purchasing a home.
The actual rate of return is largely dependant on the type of investments you select.
For example, from January 1970 to February 2003, the average compounded rate of
return for the S&P 500, including reinvestment of dividends, was approximately 11%.
Savings accounts at a bank pay as little as 1% or less. It is important to remember
that future rates of return can't be predicted with certainty and that investments
that pay higher rates of return are subject to higher risk and volatility. The actual
rate of return on investments can vary widely over time, especially for long-term
investments. This includes the potential loss of principal on your investment.
- Monthly rent
- Amount you currently
pay for rent per month.
- Income tax
- Your current
marginal income tax rate.
- Expected inflation
- Inflation rate
used to adjust amounts subject to annual increases. These amounts include rent,
insurance and tax payments.
- Home appreciates
- Annual appreciation
you expect in the home you are purchasing.
- Future sales
- The percent of
your homes selling price you expect to pay to a broker or real estate agent when
you sell your home.
- House payment
- Total of principal,
interest, taxes and insurance (PITI) paid per month for your home. Insurance includes
Principal Mortgage Insurance (PMI) and homeowner's insurance.
- Total of principal
paid per month on your mortgage.
- Tax savings
- The value of
the tax deduction you receive on your mortgage's interest and home's property taxes.
For example, if you have $900 in interest and $100 property taxes per month, the
value of the tax deduction would be $280. (At a tax rate of 28%).
- Net house
- Your house payment
minus the value of the tax deduction and principal payment.
- Net home price
- Net selling price
of your home after subtracting any sales commissions.
- Monthly PI
- Monthly principal
and interest payment.
- Monthly PMI
- Monthly cost
of Private Mortgage Insurance (PMI). For loans secured with less than 20% down,
PMI is estimated at 0.5% of your loan balance each year.
Information and interactive calculators are made available to you as self-help tools
for your independent use and are not intended to provide investment advice. We can
not and do not guarantee their applicability or accuracy in regards to your individual
circumstances. All examples are hypothetical and are for illustrative purposes.
We encourage you to seek personalized advice from qualified professionals regarding
all personal finance issues.