Home Rent vs. Buy Calculator
Wondering whether it’s cheaper for you to rent or buy? By factoring in both upfront and recurring costs of renting and buying, our handy calculator will help you determine how many years it will take before the cost of buying a house equals the cost of renting. If you plan on staying in a home past this breakeven point it may make sense to buy, but if you plan on moving before then, renting could be a better option financially.
Financial Calculators from
Dinkytown.net
Mortgage and Home Expenses: | Monthly house payment: $3,372.80 |
Down Payment and Closing Costs: | Total closing costs: $7,755.10 |
Rent, Taxes and Inflation: | Monthly rent payment: $750.00 |
Home Equity vs. Investment |
Monthly Payment Breakdown |
10 Year Projected Monthly Payments |
Definitions
Price of home
Purchase price of the home you wish to buy.
Interest rate
The current interest rate you expect to receive on your mortgage. Please note that the interest rate is different from the Annual Percentage Rate (APR), which includes other expenses such as mortgage insurance, and the origination fee and or point(s), which were paid when the mortgage was first originated. The APR is normally higher than the simple interest rate.
Term in years
The number of years over which you will repay this loan.
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.
Loan amount
Calculated amount of the loan for this home purchase.
Monthly payment (PI)
Monthly principal and interest (PI) payment.
Property tax rate
Your property tax rate. 1% for a $100,000 home equals $1,000 per year in property taxes.
Home insurance rate
Your homeowner's insurance rate. 0.5% for a $100,000 home equals $500 per year for homeowner's insurance.
Assoc. & maintenance fees
Any association fees you are required to pay per month with the ownership of this home. Also include any other maintenance costs you expect to incur with the ownership of this home that you are not paying while you continue to rent.
Cash on hand
Cash you have for the down payment and closing costs.
Loan origination rate
The percentage the lending institution charges for its origination fee. 1% for a $100,000 home equals $1,000.
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 costs
Estimate of all other closing costs for this loan. This should include filing fees, appraiser fees and any other miscellaneous fees paid.
Total for down payment
Total funds remaining for down payment.
Monthly rent payment
Amount you currently pay for rent per month.
After-tax investment return
The rate of return, after taxes, you could receive if you invested your closing costs and down payment instead of purchasing a home.
The actual rate of return is largely dependent on the types of investments you select. The Standard & Poor's 500® (S&P 500®) for the 10 years ending December 31st 2023, had an annual compounded rate of return of 15.2%, including reinvestment of dividends. From January 1, 1970 to December 31st 2023, the average annual compounded rate of return for the S&P 500®, including reinvestment of dividends, was approximately 10.9% (source: www.spglobal.com). Since 1970, the highest 12-month return was 61% (June 1982 through June 1983). The lowest 12-month return was -43% (March 2008 to March 2009). Savings accounts at a financial institution may pay as little as 0.25% or less but carry significantly lower risk of loss of principal balances.
It is important to remember that these scenarios are hypothetical and that future rates of return can't be predicted with certainty and that investments that pay higher rates of return are generally 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. It is not possible to invest directly in an index and the compounded rate of return noted above does not reflect sales charges and other fees that investment funds and/or investment companies may charge.
Income tax rate
Your current marginal income tax rate. Use the ‘Filing Status and Federal Income Tax Rates on Taxable Income’ table to assist you in estimating your Federal tax rate.
| Tax Rate | Married Filing Jointly or Qualified Surviving Spouse | Single | Head of Household | Married Filing Separately |
|---|---|---|---|---|
| 10% | $0 - $23,200 | $0 - $11,600 | $0 - $16,550 | $0 - $11,600 |
| 12% | $23,200 - $94,300 | $11,600 - $47,150 | $16,550 - $63,100 | $11,600 - $47,150 |
| 22% | $94,300 - $201,050 | $47,150 - $100,525 | $63,100 - $100,500 | $47,150 - $100,525 |
| 24% | $201,050 - $383,900 | $100,525 - $191,950 | $100,500 - $191,950 | $100,525 - $191,950 |
| 32% | $383,900 - $487,450 | $191,950 - $243,725 | $191,950 - $243,700 | $191,950 - $243,725 |
| 35% | $487,450 - $731,200 | $243,725 - $609,350 | $243,700 - $609,350 | $243,725 - $365,600 |
| 37% | Over $731,200 | Over $609,350 | Over $609,350 | Over $365,600 |
| *Caution: Do not use these tax rate schedules to figure 2023 taxes. Use only to figure 2024 estimates. Source: Rev. Proc. 2023-34 | ||||
Expected inflation rate
This is what you expect for the average long-term inflation rate. A common measure of inflation in the U.S. is the Consumer Price Index (CPI). From 1925 through 2023 the CPI has a long-term average of 3.0% annually. Over the last 40 years the highest CPI recorded was 13.5% in 1980. For 2023, the last full year available, the CPI was 3.1% annually as reported by the U.S. Bureau of Labor Statistics. Inflation rate is used to adjust amounts subject to annual increases. These amounts include rent, insurance and tax payments.
Home value appreciation
Amount you expect your home value to appreciate annually.
Future sales commission
The percent of your home's 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) and maintenance paid per month for your home. Insurance includes Principal Mortgage Insurance (PMI) and homeowner's insurance.
What are the Costs of Renting?
Our Rent vs. Buy Calculator uses monthly rent payments, and certain estimated information on after-tax investment return, income tax rate, expected inflation, home appreciation, and future sales commission (as further detailed in the definitions below) to provide a comprehensive estimate of the cost of renting.
What is the Cost of Buying a Home?
We use your inputs to estimate mortgage costs and home expenses as well as down payment amount and closing costs to calculate the cost of buying home. The mortgage costs and home expenses include purchase price, interest rate, loan term (in years), monthly PMI, property tax rate, home insurance costs, and association and maintenance fees. Down payment and closing costs are calculated including cash on hand, loan origination, points paid, and any other closing costs or fees.
How Does the Rent vs. Buy Calculator Work?
This calculator determines your breakeven point by examining how long it would take to create enough equity in your home to exceed the value of investing your cash on hand as a renter, based on the information you’ve provided and otherwise as described below. If your rent payment is less than your net house payment, the tool adds that monthly savings to your investment. If your house payment is less than your rent payment, the tool subtracts that amount from your investment.
Other Factors to Consider When Deciding Whether to Rent or Buy
Beyond the financial considerations mentioned above, you’ll likely want to consider what impact the decision whether to rent or buy will have on your preferred lifestyle. Renting provides more flexibility as you can always decide to move at the end of a lease. However, if you rent your landlord can always decide to raise your rent if you want to renew at the end of your lease. If you decide to purchase a home your monthly mortgage payment will remain the same year over year (unless you refinance), and you’ll also be building equity in your home. If you value putting your own mark on your living space, buying could also be a better option as you’ll have more freedom to renovate and design your home to your specific taste. Conversely, one of the benefits of renting is that you don’t have to spend your own money on unexpected repairs or necessary renovations.
The calculator tool provided is for informational purposes only and does not reflect any specific mortgage or home equity line of credit offered by Leader Bank or any specific terms that may be available for such products. For information on available Leader Bank products and services, please contact a Leader Bank loan officer directly. Examples of monthly payment amounts shown in calculators does not include taxes, insurance or any condominium or HOA fees applicable; as such your total monthly housing payment would be higher. For any adjustable or variable rate loan examples provided, interest rate may increase after consummation and your fully indexed rate, annual percentage rate and monthly principal and interest rates may be higher.
