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Should you rent or buy? This is a question most of us will likely face in our lives. And it is often not a simple question, because the answer depends on your readiness to commit to taking care of a home and a mortgage, as well as the availability of the right home. But there is a way to understand the financial impact of buying vs renting, and this tool can help you by calculating the net cost of buying a home versus the cost of renting over time Show more
Net costs compares the total amount of money you'd be spending over time, minus the potential value you might receive if you someday sell the property. The interactive graph will let you see what this looks like for different time periods, and how it compares if you were instead paying rent. From the tool, you'll see that the amount of time you plan on keeping the home has a major impact. To get more personal, you can customize the advanced options to crunch more specific numbers and evaluate more specific scenarios. But keep in mind that a financial comparison is just one of many factors when deciding whether to rent or buy. Show less
Enter your information below to compare your costs of buying and renting. Click "Advanced options" to change inputs like down payment, mortgage rate, income tax rate, and inflation rate.
Calculating...
This calculator compares the total cost over time of renting with the total cost of buying. It includes the most common expenses of buying and renting and takes into account how these expenses are changed over time by applying the rate of inflation, home price and rent appreciation rates, and the rate of return on the investments.
It also takes into account something known as lost opportunity costs, which is the return you could have earned by investing your money instead of spending it initially for costs like down payment or yearly. The calculator accounts the lost opportunity costs for all parts of the buying and renting scenarios.
To calculate the cost of renting, we start with the monthly rent and add renter's insurance and a refundable security deposit. To calculate the cost of buying, we start with the purchase price and the initial down payment and buyer closing costs; the monthly mortgage payment and other recurring costs like maintenance, property taxes, and insurance; income tax deductions for mortgage interest and property taxes; and the final mortgage payment, sales proceeds, and seller closing costs. We provide initial baseline assumptions that we encourage you to tailor to your personal situation.
Yearly costs are recurring monthly or yearly expenses. These include mortgage payments, HOA or condo fees (or other community living fees), maintenance costs, property taxes and homeowner’s insurance. Property taxes and the interest part of the mortgage payment are tax deductible (unless you have selected "Do not itemize" option for your income tax field).
The resulting tax savings is accounted for in each item’s totals. The mortgage payment amount increases each year for the term of the loan because the tax credit shrinks each year as the interest portion of the payments becomes smaller. When viewing the spending from year 1 to the selected year, we show the total yearly costs over all these years added up together.
Lost opportunity costs are tracked for the initial purchase costs and for the yearly costs. These costs are an estimate on how much you could have made if you had invested the down payment and all other costs based on the selected rate of return on investment adjusted to the capital tax gain rate.
When viewing the spending from year 1 to the selected year, we show the total lost opportunity costs over all these years added up together.