Rent vs. Buy Calculator



 
 

Rent Vs. Buy Calculator

Should I rent or buy? This calculator does the complicated math for you by comparing the costs of renting vs. buying a house.

You will need to input several numbers so the calculator can accurately compare all the factors affecting renting versus buying (interest, property taxes, tax savings, appreciation, opportunity costs, closing costs, selling costs, etc.).

When you finish make sure to print the handy "rent or buy" comparison table so you have an easy reference sheet.

Finally, if you need help completing any field just click on that data entry box and instructions will appear in the area to the right so you know how to answer the questions. And if you like this calculator please make sure to "like" or +1 to help us out!

Thanks, and good luck with your new home...

Entry Descriptions Entry Fields Explain/Instruct
Monthly rent ($):
Monthly rental insurance ($):
Estimated annual inflation rate (%):
Purchase price of home ($):
Down payment amount ($):
Length of mortgage term (# of years):
Mortgage's annual interest rate (%):
Discount points on home purchase (%):
Origination fee (%):
Other loan costs ($):
Mortgage Insurance (PMI %):
Homeowner's insurance rate (%):
Monthly association dues ($):
Estimated monthly maintenance ($):
Annual property tax ($):
State plus Federal income tax rate (%):
Interest rate you expect to earn on savings (%):
Expected annual home appreciation rate (%):
Number of years you will stay in this house:
Realtor commission rate (%):
Result Descriptions Result Fields Explain/Instruct
Total estimated cost of renting:
Total estimated cost of buying:

How Much Does It Cost To Rent Vs. Buy A House?

Are you trying to decide whether you should rent or buy a home?

One important factor you should consider is cost. But with so many variables, it can be daunting to sit down and calculate everything by hand.

The Rent vs. Buy Calculator makes it easy to determine the total estimated cost of renting vs. buying. Simply input all your figures, compute your totals, and print out a detailed report!

As powerful as this renting versus buying calculator is, there are more factors to consider besides cost. There are advantages and disadvantages to both renting and buying. Here’s what you need to know . . . .

Advantages And Disadvantages Of Renting

Depending on your situation, financial status, and tolerance level, renting a house might be the best option for you. Weigh your options before you decide to rent a home.

Advantages Of Renting:

  • You’re free from the hassle of maintenance problems. The landlord is responsible for maintaining appliances and repairs.
  • Rental payments might be less than mortgage payments. You won’t have to worry about paying property taxes and other incidental costs of owning a house. The housing market won’t affect you as much.
  • You can easily move. When you own a home, you might need to sell it before you can afford to move. When you’re renting, this isn’t a problem.

Disadvantages Of Renting:

  • Some landlords will not allow you to make minor alterations without consulting them first. This could include hanging pictures, and other fixtures that would leave holes in the walls.
  • Some landlords don’t pay much attention to concerns regarding repairs and maintenance. It might be difficult to get your landlord to take action quickly, if at all.
  • Rentals aren’t investments. Rental payments never build equity – but they can for the landlord. If you sell your own home, however, it’s possible to make money.

Let’s switch gears for a moment and take a look at the advantages and disadvantages of buying a house.

Advantages And Disadvantages Of Buying A House

Homeownership is not for everyone, but there are some financial and emotional advantages to consider . . . .

Advantages Of Buying A House:

  • The house will be all yours once you pay off the mortgage. Also, there’s a better chance you will earn capital gains once you sell it.
  • You’ll have the option to rent the house out should to decide to move. Rent earnings can be used to pay the mortgage.
  • You can pay off your home and stop making monthly payments. Renting, however, always means paying every month for as long as you live in the home.
  • You have the freedom to remodel and improve your home whenever you want. No landlords to stop you!

Disadvantages of Buying A House:

  • It’s a long-term financial commitment. You also need to pay property taxes and homeowners insurance.
  • It can be stressful to maintain a house. You need to maintain some funds for repairs and maintenance.
  • Considering the volatility of the market, there’s no guarantee that the value of your house will increase. There’s a chance that you may even incur losses if you’re forced to sell it due to relocation or financial constraints.
  • You’ll need to shell out a lot of money for the down payment, broker’s fees and other costs involved when buying a house. The Rent vs. Buy Calculator will take these costs into account.

Final Thoughts

Notice that the Rent vs. Buy Calculator asks you the length of time you’ll stay in the house. This matters because the costs of owning a home change over time. Don’t look at monthly payments alone. It’s important to consider future expenses and changing housing needs.

Traditional wisdom advised to buy because “homes are an investment.” But remember, these investments can go down in value – remember the subprime mortgage crisis?

This is why it’s crucial to take a bird’s-eye view of your situation. Why are you moving? What costs are involved? Is this temporary or long-term? How much can you afford? How much do utilities cost? Will you have a longer or shorter commute to work?

Don’t take this decision lightly. The Rent vs. Buy Calculator can help you decide, but be sure to count all costs – financial and otherwise – before you take the plunge.

Rent Vs. Buy Calculator Terms & Definitions

  • Rent – A tenant’s regular payment to a landlord for the use of property or land.
  • Buy – To obtain in exchange for payment.
  • Mortgage – The charging of real property by a debtor to a creditor as security for a debt, on the condition that it shall be returned on payment of the debt within a certain period.
  • Commission Rate – The amount of money, expressed as a percentage, that merchants pay their affiliates (in this case, real estate agents) per sale. You can also pay as a buyer of a home.
  • Association Dues – An amount of money that must be paid monthly by owners of certain types of residential property to an organization that assists with maintaining and improving that property and others in the same group.
  • Appreciation Rate – The rate at which an increase in value of an asset happens over time.
  • Discount Points – A type of prepaid interest mortgage borrowers can purchase that lowers the amount of interest they will have to pay on subsequent payments.
  • Insurance – A practice or arrangement by which a company or government agency provides a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a premium.
  • Inflation Rate – The rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling.
  • Down payment – An initial payment made when something is bought on credit – like a mortgage.
  • Mortgage Term – The duration of the mortgage loan.
  • Annual Interest Rate – The annual rate that is charged for borrowing, expressed as a single percentage number that represents the actual yearly cost of funds over the term of a loan.
  • Origination Fee – A fee charged by a lender on entering into a loan agreement to cover the cost of processing the loan.
  • Property Tax – A levy on property that the owner is required to pay.
  • Federal Income Tax – A tax levied by the United States Internal Revenue Service (IRS) on the annual earnings of individuals, corporations, trusts and other legal entities.
  • Capital Gain/Loss – The amount of money gained or lost for disposing properties.

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