- Years you plan to stay
- How long you expect to live in the home before selling. Buying carries large one-time costs at purchase and at sale, and equity builds slowly in the early years of a mortgage, so a longer stay spreads those costs over more years. The verdict in this calculator can flip from renting to buying as this number rises.
- Down payment
- The cash paid toward the purchase price at closing; the rest is financed with the mortgage. A larger down payment lowers the loan and the monthly payment. In this comparison, the down payment and purchase closing costs are also treated as money that could have been invested if you kept renting, so their forgone growth counts as a cost of buying.
- Forgone investment growth
- The return your up-front cash could have earned elsewhere, also called opportunity cost. The calculator grows your down payment and closing costs at the return-on-cash rate for the years you plan to stay and counts that growth as a cost of buying. A higher assumed return makes renting look relatively better; a lower one favors buying.
- Home appreciation
- The yearly rate at which the home’s market value is assumed to rise. It drives the equity you have at sale, which offsets the costs of buying in this comparison. Appreciation is not guaranteed; values can stay flat or fall, and a low rate combined with a short stay can turn buying into the more expensive option.
- Home equity
- The portion of the home you own outright: its market value minus the remaining mortgage balance. It grows as you pay down principal and as the home appreciates. The equity-at-sale result in this calculator also subtracts selling costs, because that is closer to the cash you would actually walk away with when you sell.
- Closing costs
- One-time fees paid when you buy, such as lender charges, title insurance, appraisal and recording fees, entered here as a percentage of the price. They are not recovered when you sell, so they weigh most heavily on short stays. The calculator also counts the investment growth this cash could have earned if you had kept renting.
- Selling costs
- The costs of selling the home, mainly agent commissions plus transfer taxes and other settlement charges, entered as a percentage of the sale price. They are deducted from your equity at sale. Because they are charged on the whole sale price, not just your equity, they can absorb a large share of the gain on a short stay.
- Property tax
- An annual tax charged by local governments based on the assessed value of the home. Here it is entered as a percentage of the home’s value, so it grows as the home appreciates. Rates vary widely by state and county, so using the rate for the area you are considering improves the comparison more than a national average would.
- Maintenance
- Ongoing repair and upkeep costs, such as roofing, appliances, plumbing and paint, entered as a yearly percentage of the home’s value. Renters usually leave these to the landlord, so they are a real cost of owning that the rent side does not carry. Actual spending is uneven: some years cost little and others bring a large repair.