Rent vs. Buy Calculator
Is it cheaper to rent or buy a home?
Nationally, at today’s prices and rents,
buying would be cheaper than renting until the 30-year fixed rate reaches 10.5%.
San Jose has the lowest mortgage rate "tipping point" at 5.2%, followed by San
Francisco and Honolulu.
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One Time Costs
Ongoing Costs
Mortgage Assumptions
Economic Assumptions
Renting is 3% cheaper.
Figures are averaged over time and discounted.
Renting Costs
$2,383 / month
$2,383 / month
Buying Costs
$2,445 / month
$2,445 / month
Definitions
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 homeownership 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%. Putting less than 20% down typically requires mortgage insurance, which is not included in this calculator.
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.
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 homeownership 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%. Putting less than 20% down typically requires mortgage insurance, which is not included in this calculator.
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.
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.
Renovations: Both 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.
Utilities: 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.
Renovations: Both 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.
Utilities: 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.
Methodology
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.We regularly publish our Rent versus Buy report for the U.S. and the 100 largest metros on the Trulia Trends blog. (See Full Methodology)
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