Rent vs. Buy Calculator

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Rent Vs Buy:

Rent Vs buy a home decision is a dilemma that the majority of people face whilebuying their first home. Buying home is the tough decision in one’s life andowning a home is a dream for everyone. The decision is evaluated based on thefinancial standards of the person. Renting the house or get a mortgage dependson multiple factors like finance, long-term plans and real estate market in theparticular area.

Reasons to buy a home:

Buying the property can be the great investment. If the price of the property in the area is rising and buying now will be useful otherwise after a few years the price will be very high.

Some indication that buying a property is right for you:

  • If you are planning to stay in the same place for the longest time.
  • If you are willing to rent some part of the home or all of the property.
  • If you are eligible for a fair mortgage and you can afford some portion of your income for the mortgage.
  • If you are willing to put some liquidity into the fixed asset whose value can be increased over the time.

 Reasons to rent a home:

Although owning a home is like the fixed asset or a sense of security, home ownership also has its own drawbacks. If you are not sure about staying in the same place longer it is better to rent instead of buying.

Some indication that renting a property is right for you:

  • If you are not sure how long you will be staying in the same place.
  • If you cannot afford to pay the mortgage or you cannot bother the maintenance or repairs of the house.
  • If your finances status likely to change soon or unable to make mortgage payments.

Major factors:

The following are the major factor should be kept in mind while purchasing or renting the property.

  • Length of stay.
  • Average investment.
  • Home appreciation rate.
  • Mortgage interest rate.

Minor factors:

The may not be critical to the process but they are also be included when you are purchasing or renting the home.

  • Property taxes.
  • Homeowner’s insurance.
  • Maintenance.
  • Repair.
  • Condo or HOA fees.
  • Buying and selling costs.

Renting:

  • Application fee or upfront cost.
  • Security deposit.
  • Renter’s insurance.
  • Rent increases.

 The components included in the rent Vs buy calculator:

Home purchase:

  • Home price: Purchasing cost of the house.
  • Down payment: The payment made while purchasing.
  • Interest rate: The interest rate on the mortgage.
  • Loan term: The time period of the mortgage.
  • Buying closing costs: The closing cost while buying the home.
  • Property tax: The property tax paid on the home.
  • Property tax increase: Increased property tax if any.
  • HOA fee: The HOA fee paid.
  • Maintenance cost: The amount spent on the maintenance of the property.
  • Home value appreciation: The home value appreciation is calculated based on the price sale etc.
  • Cost/insurance increase: The increased cost of the insurance.
  • Selling closing cost: The closing cost while selling the property.

Home rent:

  • Monthly rental fee: The monthly rent paid.
  • Rental fee increase: The increased rental fee.
  • Renter’s insurance: The insurance paid by the renter for renting property.
  • Security deposit: The amount deposited as the security to the owners.
  • Upfront cost: The upfront cost available to make payment.

Other information:

  • Average investment return.
  • Marginal federal tax rate.
  • Marginal state tax rate.
  • Tax filing status.

Using this rent Vs buy calculator you can identify the where you want to buy or rent the property based on the requirement.