Annual Property Tax. This varies by locality. We use the actual average property tax rate for your metro area. You can also input your personal property tax rate as a percent of your home's value or a national baseline assumption of 1.35%.
Buying Closing Costs. Include loan origination fees, mortgage points, title insurance, appraisal, escrow deposit, fees for running a credit report, and other closing costs.
Discount Rate. The opportunity cost of your money. It reflects what your money would earn as savings or investments other than housing. The higher the discount rate, the more expensive home ownership is because buying a home involves a big upfront payment.
Down Payment. The share of the purchase price you pay upfront. Our baseline assumption is 20%. Unless you are a Veteran using a VA loan, putting less than 20% down typically requires mortgage insurance.
FHA loan. An FHA insured loan is a US Federal Housing Administration mortgage insurance backed mortgage loan which is provided by a FHA-approved lender. FHA insured loans are a type of federal assistance and have historically allowed lower income Americans to borrow money for the purchase of a home that they would not otherwise be able to afford.
Homeowner Condo/HOA Fees. This is for monthly condominium or homeowners' association fees, or any other additional costs of owning not captured elsewhere.
Homeowner's Insurance. Typically required by mortgage lenders. We assume an annual cost of 0.46% of the home's value. Homeowners insurance could be significantly higher if you pay high premiums for risk factors such as floods or earthquakes.
Inflation. Impacts costs such as utilities and renovations, which we assume increase at the rate of inflation.
Long Term Capital Gains Tax. Assessed if the sale price exceeds the original purchase price by $500,000 if filing as married, or $250,000 if filing as an individual. We have assumed a 15% tax rate. Your tax situation might be different.
Military Service. Many Veterans and active duty service members are eligible for a VA loan. VA loans are issued by private lenders but guaranteed by the Department of Veterans Affairs. VA loans don't require a down payment or private mortgage insurance. However, VA loans are required to pay an upfront fee.
Mortgage Term. The number of years until the mortgage is paid off. Our baseline assumption is 30 years. Some mortgages have shorter terms such as 15 years.
PMI (Private Mortgage Insurance). Private mortgage insurance is percentage of the original loan amount added each year. Included if the down payment is less than 20%, but drops to zero in the year after outstanding loan balance falls under 80% of home value. You can check the latest rates here .
regular maintenance and home improvement. We assume homeowners pay 1% annually of the home's value, although this can run significantly higher.
Rent Appreciation. The amount that your rent is likely to increase each year.
Rent Insurance. A policy that covers your personal possessions against perils such as fire, theft, or vandalism. We assume this is 1.32% of your monthly rent. This is not a required cost.
Price Appreciation. The amount that your home is likely to appreciate in value each year, but – be warned -- appreciation is volatile and unpredictable. We make a conservative assumption for each metro area, based on long-term and recent local trends, typically 2-3% per year. This is nominal, not real, appreciation.
Selling Closing Costs. Include the real estate agents' commissions, transfer taxes, title insurance fees, and other closing costs when selling a home.
Upfront Fee. Percentage of loan amount added to closing costs for VA loans.
Additional Utility Cost for Homeowners. Water, electric, and sewage are often higher for homeowners than for renters. We assume you would pay $100 per month more in utilities as a homeowner than as a renter.
Our methodology compares the total cost of renting with the total cost of buying. 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 calculate 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. These costs depend on numerous assumptions, like your mortgage rate, your income tax rate, how long you stay in a home, and local home price appreciation: we provide baseline assumptions that we encourage you to tailor to your personal situation. Finally, we use a net present value (NPV) calculation to compare the total costs over time of renting versus buying.
This calculator is provided for educational and informational purposes only. You should not take any action on the basis of the information provided through this calculator. It relies on assumptions and information provided by you regarding your goals, expectations and financial situation. All figures are hypothetical and may not be accurate indicators of historical or current performance. Past performance does not guarantee nor indicate future results. This calculator does not take into account individual circumstances and should not be relied upon in any way as the sole source of information. Please consult with financial, tax, and legal advisers for any advice relating to your personal circumstances. This service shall not infer that the company assumes any fiduciary duties.