| Rent vs. Buy
Should you rent or
should you buy your home? It takes more than looking at your mortgage payment to answer
this question. This calculator helps you weed through the fees, taxes, and monthly
payments to help you make a good financial decision.
Definitions
- Price of home: Purchase price of the home you wish to buy.
- Cash on hand: Cash you have for the downpayment and closing costs.
- Interest rate: The current interest rate you can receive on your mortgage.
- Term in years: The number of years over which you will repay this loan.
- Property tax rate: Your property tax rate. 1% for a $100,000 home equals $1,000
per year in property taxes.
- Home insurance rate: Your home owners insurance rate. 0.5% for a $100,000 home
equals $500 per in for home owners insurance.
- Loan origination rate: The percentage the lending institutions charges for its
origination fee. 1% for a $100,000 home equals $1,000.
- Points paid: The total number of points paid to reduce the interest rate of your
mortgage. Each point costs 1% of your mortgage balance.
- Other closing costs: Estimate of all other closing costs for this loan. This
should include filing fees, appraiser fees and any other misc. fees paid.
- Total closing costs: Total up front costs to close your loan. This is the sum of
the loan origination fee, amount paid for points and other closing costs.
- Total for downpayment: Total funds remaining for downpayment.
- Loan amount: Total amount of loan.
- Investment return: Annual percentage return you would recieve if you invested
your closing costs and downpayment instead of purchasing a home.
- Monthly rent payment: Amount you currently pay for rent per month.
- Income tax rate: Your current marginal income tax rate.
- Expected inflation rate: Inflation rate used to adjust amounts subject to annual
increases. This includes rent, insurance and tax payments.
- Home appreciates at: Annual appreciation you expect in the home you are
purchasing.
- Home sales commission: The percent of your homes selling price you expect to pay
to a broker or real estate agent when you sell your home.
- House payment: Total of principle, interest, taxes and insurance paid per month
for your home. Insurance includes PMI and home owners.
- Principle payment: Total of principle paid per month on your mortgage.
- Tax savings: The value of the tax deduction you recieve on your mortages's
interest and home's property taxes. For example, if you have $900 in interest and $100
property taxes per month, the value of the tax deduction would be $280. ( At a tax rate of
28% )
- Net house payment: Your house payment minus the value of the tax deduction and
principle payment.
- Net home price: Net selling price of your home after subtracting any sales
commissions.
- Monthly PI: Monthly principle and interest payment.
- Monthly PMI: Monthly cost of Principle Mortgage Insurance (PMI). For loans
secured with less than 20% down, PMI is estimated at 0.5% of your loan balance each year.
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