Rent or buy calculator: Should you rent or buy a home?
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Rent vs. Buy
Should you rent or should you buy a home? There are many factors to consider in addition to the amount of your mortgage loan and monthly mortgage payment. This calculator helps you sort through these factors -- fees, taxes, and monthly payments -- to help you make a decision. Click the "View Report" button for a detailed look at the results.
Rent vs. Buy - Definitions
Price of home - Purchase price of the home or real estate you wish to buy.
Cash on hand - Cash you have for the down payment and closing costs.
Interest rate - The current interest rate you expect to receive on mortgage loan - mortgage rate.
Term in years - The number of years over which you will repay this mortgage loan.
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.
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 loan. Each point costs 1% of your mortgage loan 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.
Association and 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.
Total for down payment - Total funds remaining for down payment.
Mortgage amount - Total amount of loan.
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 dependant on the type of investments you select – CDs, money Market, stock, etc.
Income tax rate - Your current marginal income tax rate.
Expected inflation rate - 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), which has a long-term average of 3.1% annually, from 1925 through 2007. The CPI for 2007 was 2.4%, as reported by the Minneapolis Federal Reserve. Inflation rate is 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 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) paid per month for your home. Insurance includes Principal Mortgage Insurance (PMI) and homeowner's insurance.
Initial 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 $250. (At a tax rate of 25%).
Initial principal payment - Total of principal paid per month on your mortgage loan.
Net house payment - Your initial 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 mortgage loans secured with less than 20% down, PMI is estimated at 0.5% of your loan balance each year.
CalculatorPlus provides free mortgage loan calculator to calculate adjustable rate mortgage or to determine mortgage approval. In addition, homeowners can use the mortgage calculator insurance to calculate their monthly mortgage payment, or the loan amortization calculator to generate an amortization schedule. These loan calculators and other finance calculator including CD calculator and credit card calculator available on CalculatorPlus can help homeowners and other users make smart personal finance decisions (calculator loan).