How to Use the Rent vs Buy Calculator
A plain-English explanation of every input. Understand what each field means and how it affects your results.
Property Location
Location Type
Choose National for country-wide averages, State for regional data, ZIP Code for neighborhood-level lookup, or Metro for city-level data. More specific locations give more accurate appreciation rates and property tax estimates.
Appreciation Mode
Historic uses trailing 10-20 year average appreciation for the location. Projected uses a multi-factor model (job growth, supply constraints, population trends) to predict future appreciation. Custom lets you set your own rate.
Property Purchase
Home Price
The purchase price of the property. Use the actual listing price or your offer amount. This is the single biggest driver of the calculation.
Down Payment
The upfront cash you put toward the purchase, expressed as a percentage or dollar amount. A higher down payment means a smaller loan and no PMI (if 20%+), but ties up more capital that could be invested elsewhere.
Mortgage Rate
Your annual interest rate on the home loan. Check current rates at your bank or mortgage broker. Even a 0.5% difference significantly impacts total interest paid over the life of the loan.
Loan Term
Choose 15-year or 30-year fixed. A 15-year term has higher monthly payments but much less total interest. A 30-year term has lower payments, freeing cash for investing.
Closing Costs
One-time fees paid at purchase (appraisal, title insurance, attorney, origination fees). Typically 2-5% of the home price. These are a sunk cost of buying.
Ownership Costs
Property Tax Rate
Annual property tax as a percentage of home value. This varies widely by location (0.3% in Hawaii to 2%+ in New Jersey). Check your county assessor's website for the actual rate. The calculator auto-fills this when you select a location.
Home Insurance
Annual homeowners insurance premium in dollars. Get a quote from an insurer or use a typical estimate ($1,200-$2,400/year for a median-priced home). This inflates annually with the general inflation rate.
Maintenance
Annual maintenance budget as a percentage of home value. The common rule of thumb is 1% per year, but older homes or those with pools, large yards, or aging systems may need 1.5-2%. This covers repairs, appliance replacement, and general upkeep.
HOA / Condo Fees
Monthly homeowners association or condo fees. Enter $0 if the property has no HOA. These fees typically cover shared amenities, exterior maintenance, and insurance for common areas. They inflate annually with the general inflation rate.
PMI Rate
Private Mortgage Insurance rate, charged when your down payment is less than 20%. Typically 0.5-1.5% of the loan balance per year. PMI automatically drops off once your equity reaches 20% of the home's current value.
Market Assumptions
Investment Preset
Choose a benchmark for the return rate on investments the renter makes instead of buying. S&P 500 (10.2% historic average) is the default. Options include total US market, Nasdaq-100, bonds, REITs, gold, and more. This is the opportunity cost of tying up your capital in a house.
Investment Return Rate
The expected annual return on investments. This auto-fills when you select a preset but can be customized. Use nominal (not inflation-adjusted) returns for consistency, since all other values in the calculator are also nominal.
Inflation Rate
Expected annual inflation rate. This affects how insurance, HOA fees, and the standard deduction grow over time. The US long-term average is about 2.5%. Higher inflation makes a locked mortgage payment relatively cheaper over time.
Rent Scenario
Monthly Rent
Your current or expected monthly rent for a comparable home. Be honest about what you'd actually pay — comparing a $450K house to a $1,200/mo apartment isn't apples-to-apples. Use the rent for a similar size, location, and quality.
Annual Rent Increase
How much rent goes up each year, as a percentage. The national average is about 3-4%, but high-demand cities can see 5-8%. The calculator auto-fills this based on your selected location. This is a key variable — higher rent increases favor buying over time.
Security Deposit
Number of months of rent held as a security deposit by your landlord. Typically 1 month, sometimes 2 in high-demand markets. This money is tied up for the entire rental period and can't be invested, representing an opportunity cost. It's returned when you move out (minus any damages).
Renting Overhead
A lump-sum estimate of total one-time costs you'll incur as a renter over your time horizon. This includes moving costs (~$1,000 each time you move), broker fees (common in cities like NYC and Boston, often one month's rent), furniture/setup costs, and utility hookup fees. A common estimate is ~$1,000 every 3 years for moving alone, plus any broker fees. This is deducted from the renter's starting investment capital as a sunk cost.
Time Horizon
Years to Stay
How long you plan to live in the home before selling or renting it out. This is the most important variable in the rent-vs-buy decision. Short stays (1-5 years) usually favor renting because buying has large upfront costs (closing costs, selling costs) that haven't been offset by appreciation. Longer stays (7-15+ years) tend to favor buying as equity builds and the locked mortgage becomes cheaper relative to rising rents.
Refinance Scenario
Refinance Events
Add one or more refinance events to model rate changes during your ownership period. For each refinance, specify the year it occurs, the new interest rate, the loan product (30-year fixed, 15-year fixed, ARM, etc.), and the closing cost percentage. Refinancing makes sense when you can lower your rate by at least 0.5-1% and plan to stay long enough to recoup the closing costs. The break-even period is typically: closing costs / monthly savings.
Tax Deduction (US Only)
Include Tax Deduction
Toggle on to model the US mortgage interest and property tax (SALT) deductions. This only benefits you if your itemized deductions exceed the standard deduction. For many homeowners, especially those with smaller mortgages, the standard deduction is higher and there's no tax benefit from homeownership.
Filing Status
Single or Married Filing Jointly. This determines the standard deduction amount ($14,600 single, $29,200 married in 2024). Married filers need significantly higher itemized deductions to benefit.
Marginal Tax Rate
Your highest federal tax bracket (e.g., 22%, 24%, 32%). The tax savings equal the deduction amount times this rate. Find your bracket at IRS.gov based on your taxable income.
Other Itemized Deductions
Annual non-housing itemized deductions such as state/local income tax (beyond the SALT cap), charitable donations, and medical expenses. These help you exceed the standard deduction threshold, making your housing deductions (mortgage interest + property tax) more likely to produce tax savings. For example, if you donate $5,000/year to charity and pay $3,000 in state income tax, enter $8,000. Default is $5,000.
Invest Tax Savings
When enabled, any tax savings are reinvested in the market at your chosen return rate, compounding over time. This gives a more realistic picture of the true benefit of tax deductions.
Exit Strategy
Sell vs Rent Out
Choose what you'll do with the property when you leave. Sell calculates net proceeds after selling costs (agent commission, transfer tax, repairs). Rent It Out models keeping the property as an investment — rental income minus expenses, mortgage, and management fees.
Post-Exit Projection
How many years to project net worth after you exit. The calculator compares both exit strategies: selling and investing the proceeds vs. renting out and investing the rental cashflow. This helps you see which strategy builds more wealth long-term.
Selling Costs
Agent commission (typically 5-6%), transfer tax, title/escrow fees, attorney costs, and repairs/staging. These total 7-10% of the sale price and are a major factor in the rent-vs-buy math for short holding periods.
Rental Economics
If renting out: set the monthly rent you'd charge, property management fee (8-10% of rent), vacancy rate (5-10%), and landlord maintenance costs. The net cashflow summary shows whether the property generates positive income after all expenses including the mortgage payment.
Advanced Features
Monte Carlo Simulation
Runs 1,000 simulations (configurable up to 5,000) where investment returns, home appreciation, and rent growth are randomized each year using normal distributions around your input values. The fan chart shows P10–P90 probability bands for both buying and renting net worth, with summary stats showing the probability that buying beats renting. Uses a seeded random number generator for reproducibility — change the seed to see different random outcomes. Investment return volatility is ~15% (S&P 500 historical), home appreciation ~4%, and rent growth ~2%.
Maintenance Shocks
A total dollar budget for unexpected large expenses over your entire stay — roof replacement, HVAC failure, plumbing emergencies, appliance replacement, and foundation repair. The default is $10,000 spread evenly across your years of ownership. Increase this for older homes (20+ years) or homes with aging systems; decrease for newer construction with warranties. This amount is on top of the regular maintenance percentage already included in Ownership Costs. When Monte Carlo is enabled, actual random shock events are sampled per simulation run rather than using the even spread.