Rent Vs Buy Mortgage Calculator:
Rent or Buy Home?

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Alerts you to the hidden costs of home ownership and helps you to make an unbiased cost comparison between buying and renting a residence.

This free online Rent Vs Buy Mortgage Calculator will calculate and compare the cost of renting to the cost of buying a home.

Unlike other online rent or buy calculators that are biased in favor of buying a home -- because they are created for mortgage brokers and real estate agents -- the calculator on this page includes all of the costs of home ownership that self-serving others leave out of the renting versus buying equation.

Double Your Pleasure? Then Double Your Costs!

The problem with most rent versus buy calculators is that they fail to account for the additional costs that come from moving from a 1,200 square foot apartment with no yard or driveway, into a 2,500 square foot home complete with a yard and a driveway.

When you move into a home that is double the size of your apartment and that comes with a yard and a driveway, here are some costs that you need to be aware of that mortgage brokers and real estate agents probably won't be alerting you to:

  • You will now have to pay the utility bill on heating and cooling twice the square-footage.
  • You have twice the space to furnish and decorate.
  • You will now have a yard and driveway to maintain.
  • You will now be paying property taxes on the value of the entire property.
  • You will now have to get homeowner insurance to protect you from loss, versus the landlord having to purchase the insurance.
  • You will now have to repair, maintain, and replace all fixtures, appliances, heating-cooling equipment, landscaping equipment, floor coverings, roof coverings, siding, pavement, and so on, as they all break, wear-out or become obsolete. And if you fail to properly maintain your property, don't plan on the value appreciating as much as the real estate agent is boasting it will.

If you take your time when entering data into the rent vs buy mortgage calculator on this page, you will likely be shocked as to just how much these costs of ownership can add up to over time.

Don't Be an Ostrich

In my experience, the reason most people are forced to take out second mortgages on their homes is because they had their head buried in the sand with regard to home ownership costs. They relied on so-called "experts" to tell them whether or not they could afford the home they bought. Unfortunately, these home buyers failed to recognize that those "experts" stood to gain from getting them to ignore the costs of home ownership.

The choice is yours, you can choose to ignore the costs of home ownership when contemplating a home purchase, or you can take painstaking steps to accurately forecast and budget for them. If you fail to accurately forecast and budget for them, then you will likely need to take out a second mortgage when they show up "unexpectedly." On the other hand, if you do take the time to accurately forecast and budget for them, then you will either end up in a smaller home than you had hoped for, or you may be forced to continue to rent.

With that, let's use the Rent Vs Buy Mortgage Calculator to calculate and compare the cost of renting to the true cost of buying a home.

Rent or Buy Calculator
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Instructions: Complete all applicable renting and buying fields and then click the "Calculate Rent Vs Buy Home" button.

Mouse over the blue question marks for a further explanation of each entry field. More in-depth explanations can be found in the glossary of terms located beneath the Rent Vs Buy Mortgage Calculator.

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Help Monthly rent ($):
Help Monthly utilities not included in rent payment ($):
Help Monthly rental insurance ($):
Help Expected annual inflation rate (%):
Help Purchase price of home ($):
Help Down payment amount ($):
Help Length of mortgage term (# of years):
Help Mortgage's annual interest rate (%):
Help Discount points on purchase of home (%):
Help Origination fees (%):
Help Other loan costs ($):
Help Mortgage Insurance (PMI %):
Help Homeowner's insurance rate (%):
Help Monthly association dues ($):
Help Average monthly maintenance ($):
Help Average monthly home utility expense ($):
Help Annual property tax ($):
Help State plus Federal income tax rate (%):
Help Interest rate you expect to earn on savings (%):
Help Expected percentage your home will appreciate by each year (%):
Help Number of years you will stay at this property (#):
Help Realtor commission rate (%):
Help Rent payment: Help House payment:
Cost Benefit Analysis
Note: All costs are adjusted upward by the entered inflation rate for the period of time you expect to stay in the purchased home.
Renting Costs Buying Costs
Help Rent payments: Help Interest cost:
Help Insurance: Help Insurance:
Help Utilities: Help Utilities:
    Help Closing costs:
    Help Property taxes:
    Help Maintenance:
    Help Assoc. Dues:
    Help PMI:
    Help Selling cost:
Help Total rent cost: Help Total buy cost:
Renting Benefits Buying Benefits
Help Interest earned: Help Tax savings:
    Help Appreciation:
Help Rent benefits: Help Buy benefits:
Net Rent Results Net Buy Results
Help Net rent cost: Help Net buy cost:
Help Rent savings: Help Buy savings:
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Rent Vs Buy Mortgage Calculator Glossary of Terms

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Monthly rent: The amount of the monthly rent payment.

Monthly utilities not included in rent payment: The total amount of any monthly utilities you pay that are not included in the rent payment (heat, laundry, electric, trash removal, garage rental, etc.).

Monthly rental insurance: The monthly rental insurance premium. If you are not paying insurance on the contents of your apartment, leave this field blank.

Expected annual inflation rate: The annual inflation rate. Enter as a percentage (for .04, enter 4%). This is used to inflate the costs of rent, insurance, maintenance, dues and property taxes for the length of time you plan to stay in the purchased home.

Purchase price of home: The total purchase price of the home -- not including closing costs.

Down payment amount: The amount you will have available to put down on the house after you have set aside the cash you will need to pay the closing costs.

Length of mortgage term: The number of years you are financing the home for. The longer it takes you to repay the home loan, the more you will pay in finance charges.

Mortgage's annual interest rate: The annual interest rate of the mortgage. Enter as a percentage (for .0625, enter 6.25%).

Discount points on purchase of home: Discount points are paid up front in order to reduce the interest rate of your mortgage. Each point represents 1% of your mortgage balance. Enter as a percentage (for .01, enter 1%).

Origination fees: The percentage (often as high as 1% of the loan amount) that a lending institution charges for processing and originating a loan.

Other loan costs: The total of other loan related costs, such as filing fees, transfer fees, appraiser fees, etc.

Mortgage Insurance: If your downpayment is less than 20% of the value of the home you are buying, you may be required to pay private mortgage insurance (PMI) of somewhere between 0.2% and 0.5% of your principal balance each month. Enter as a percentage (for .004, enter.4%).

Homeowner's insurance rate: Your homeowner insurance rate -- entered as a percentage of the value of your home. Typical rate is 0.5%. Enter as a percentage (for .005, enter .5%).

Monthly association dues: If will be forced to join a homeowner association when you purchase the home, enter your monthly dues in this field.

Average monthly maintenance: The amount you expect to spend on repairing and maintaining your home. A rule of thumb is 1% of the purchase price of the home per year. So if the home price is $200,000, the monthly maintenance costs you should budget for would be $166.67 (200000 X .01 ÷ 12).

Average monthly home utility expense: The amount you expect to spend on utilities each month (fuels, electric, trash, water & sewer, etc.). According to a recent study by the Census Bureau, the average utility costs for a home ran about 1.5% of the purchase price per year. So if the home price is $200,000, the monthly utility costs you should budget for would be $250.00 (200000 X .015 ÷ 12).

Annual property tax: The amount of property taxes you expect to pay each year. Property taxes typically run about 1.1% of the home price per year. So if the home price is $200,000, the annual property tax costs you should budget for would be $2,200.00 (200000 X .011).

State plus Federal income tax rate: Your combined state and federal income tax percentage rate. Enter as a percentage (for .28, enter 28%).

Interest rate you expect to earn on savings: The annual interest rate you expect to earn on the down payment and closing costs you will invest if you decide to rent instead of buy. Enter as a percentage (for .07, enter 7%).

Expected percentage your home will appreciate by each year: The percentage amount you expect your house to appreciate by each year. Enter as a percentage (for .03, enter 3%).

Number of years you will stay at this property: The number of years you expect to rent or own the property you are considering. Typically, if you plan to move out of a home in less than 5 years from the date of purchase, you may be better off renting. That's because the first 5-years of mortgage payments are mostly interest.

Realtor commission rate: The percentage of your home selling price that you expect to pay a real estate agent or broker when it is time to sell your home. Enter as a percentage (for .07, enter 7%).

Rent Vs Buy Mortgage Calculator Result Fields

Rent payment: This is the monthly rent payment as entered in the top of the rent vs buy mortgage calculator.

House payment: This is the monthly principal and interest (PI) payment based on your entered mortgage amount, interest rate, and loan term.

Rent Vs Buy Mortgage Calculator Cost Benefit Analysis

Rent Vs Buy Mortgage Calculator Rent Results

Rent payments: This is the inflation-adjusted total of all rental payments for the number of years you plan to stay in the purchased house.

Insurance: This is the inflation-adjusted total of all rental insurance premiums for the number of years you plan to stay in the purchased house.

Utilities: This is the inflation-adjusted total of all estimated rental utilities for the number of years you plan to stay in the purchased house.

Total rent cost: This is the inflation-adjusted total of the estimated cost of renting for the number of years you plan to stay in the purchased house.

Interest earned: This is the total interest you expect to earn on the investment of the closing costs and down payment that you would not have to pay out if you chose to rent instead of buy.

Rent benefits: This is the total benefits of renting for the time you plan to stay in the purchased house.

Net rent cost: This is the net cost of renting (cost minus benefits) for the period of time you plan to stay in the purchased house.

Rent savings: If the cost to rent is less than the cost to buy, this field will display the estimated savings. Otherwise if renting will cost you more than buying, this field will display n/a.

Rent Vs Buy Mortgage Calculator Buy Results

Interest cost: This is the total of all interest payments you will pay on your mortgage for number of years you plan to stay in the purchased house.

Insurance: This is the inflation-adjusted total of all homeowner insurance premiums for the number of years you plan to stay in the purchased house.

Utilities: This is the inflation-adjusted total of all estimated household utility expenses for number of years you plan to stay in the purchased house.

Closing costs: This is the total closing costs you will pay at the time of the mortgage closing.

Property taxes: This is the inflation-adjusted total of all property tax payments for the number of years you plan to stay in the purchased house.

Maintenance: This is the inflation-adjusted total of all estimated home maintenance expenses for number of years you plan to stay in the purchased house.

Assoc. Dues: This is the inflation-adjusted total of all homeowner association dues for the number of years you plan to stay in the purchased house.

PMI: This is the total of all estimated Private Mortgage Insurance (PMI) payments for the number of years you plan to stay in the purchased house.

Selling cost: This is the estimated real estate commission you will need to pay when you are ready to sell the purchased house.

Total buy cost: This is the inflation-adjusted total cost of buying and owning the home for number of years you plan to stay in it.

Tax savings: This is the estimated tax savings you will realize from being able to deduct the interest charges from your taxable income. Please keep in mind that if you paid cash for the home there would be no interest charges, and therefore no tax savings. When you pay interest charges on a mortgage, you are actually paying $1 of interest charges to save 25¢ (if you are in a 25% tax bracket), which does not make any sense.

Appreciation: This is how much you expect the value of your home to increase during the period of time you plan to stay in home. Please keep in mind what happened to home values in 2009. Contrary to what mortgage brokers and real estate agents want you to believe, home values are not guaranteed to increase over time.

Buy benefits: This is the total benefits of buying a home for period of time to plan to stay in it.

Net buy cost: This is the net cost of buying a home (cost minus benefits) for the period of time you plan to stay in it.

Buy savings: If the cost to buy is less than the cost to rent, this field will display the estimated savings. Otherwise if buying will cost you more than renting, this field will display n/a.

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