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 decision between these two options. This report is based on the original purchase price, fees and taxes payable at that time. Insurance and tax costs can fluctuate from year to year. Click the 'View Report' button for a detailed look at the results.

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This is based on your home's estimated equity minus a HOME_COMMISION_RATE sales commission paid to brokers or real estate agents when you sell your home. It also assumes your home will appreciate at HOME_APPRECIATION_RATE per year and you have an income tax rate of TAX_RATE. RESULT_MESSAGE_ADVICE

We calculated your break even point by examining how long it would take to create enough equity in your home to exceed the value of investing your cash on hand. We also accounted for differences in your monthly rent and house payments. If your rent payment is less than your net house payment, we add that monthly savings to your investment. If your house payment is less than your rent payment we subtract that amount from your investment. You may notice that on the schedule at the bottom of this report the investment value can be reported as negative. This happens if your house payment is significantly lower than your rent payment. It illustrates that if you continue to rent the extra cost of renting would, in effect, use up your cash on hand. **GRAPH**

Estimated Loan Information

Your total monthly payment was estimated at MONTHLY_TOTAL_PMT. Your down payment was estimated at TOTAL_FOR_DOWNPAYMENT and you had a home price of PRICE_OF_HOME. This is for a LENGTH_OF_LOAN year mortgage at INTEREST_RATE in the amount of LOAN_AMOUNT. Your total closing costs for this loan are estimated at TOTAL_CLOSING_COSTS.

Your current monthly rent is MONTHLY_RENT. The expected inflation rate of INFLATION_RATE annually was used to estimate future rent and property taxes. The rate of return use for investments was INVESTMENT_RETURN per year after taxes. **GRAPH**

Your MONTHLY_TOTAL_PMT monthly payment consists of:
Principal and interestMONTHLY_PI
Monthly PMIMONTHLY_PMI
TaxesPROPERY_TAX_MONTHLY
InsuranceHOME_INSURANCE_MONTHLY
Association dues & maintenanceMAINTENANCE

Closing costs estimate of TOTAL_CLOSING_COSTS consists of:
Amount of points paidPOINTS_PAID_AMT
Loan origination feeLOAN_ORIGINATION_AMT
Other closing costsOTHER_CLOSING_COSTS

To avoid PMI payments, a DOWNPAYMENT_20 down payment is required. This equals 20% of your home's purchase price. The total amount of cash required for a 20% down payment plus closing costs would be CLOSING_CLOSING_COSTS_20.

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Analysis of Future Payments

**REPEATING GROUP**

Rent vs. Buy Definitions

Price of home
Purchase price of the home you wish to buy.
Interest rate
The current interest rate you expect to 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 homeowner's insurance rate. 0.5% for a $100,000 home equals $500 per year for homeowner's insurance.
Association and maintenance fees
Any association fees you are required to pay per month with the ownership of this home. Also include any other maintenance costs you expect to incur with the ownership of this home that you are not paying while you continue to rent.

Cash on hand
Cash you have for the down payment and closing costs.
Loan origination rate
The percentage the lending institution 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 miscellaneous fees paid.
Total for down payment
Total funds remaining for down payment.
Monthly rent payment
Amount you currently pay for rent per month.
After-tax investment return
The rate of return, after taxes, you could receive if you invested your closing costs and down payment instead of purchasing a home.

The actual rate of return is largely dependent on the types of investments you select. The S&P 500® for the 10 years ending Dec. 31st, 2013 had an annual compounded rate of return of 7.3%, including reinvestment of dividends. From January 1970 through the end of 2013, the average annual compounded rate of return for the S&P 500®, including reinvestment of dividends, was approximately 10.6% (source: www.standardandpoors.com). Since 1970, the highest 12-month return was 61% (June 1982 through June 1983). The lowest 12-month return was -43% (March 2008 to March 2009). Savings accounts at a bank may pay as little as 0.25% or less but carry significantly lower risk of loss of principal balances.

It is important to remember that these scenarios are hypothetical and that future rates of return can't be predicted with certainty and that investments that pay higher rates of return are generally subject to higher risk and volatility. The actual rate of return on investments can vary widely over time, especially for long-term investments. This includes the potential loss of principal on your investment. It is not possible to invest directly in an index and the compounded rate of return noted above does not reflect sales charges and other fees that funds and/or investment companies may charge.

Income tax rate
Your current marginal income tax rate. Use the table below to assist you in estimating your Federal 2014 tax rate.
Filing Status and Income Tax Rates 2014*
Tax RateMarried Filing Jointly or Qualified Widow(er)SingleHead of HouseholdMarried Filing Separately
10%$0 - $18,150$0 - $9,075$0 - $12,950$0 - $9,075
15%$18,150 - $73,800$9,075 - $36,900$12,950 - $49,400$9,075 - $36,900
25%$73,800 - $148,850$36,900 - $89,350$49,400 - $127,550$36,900 - $74,425
28%$148,850 - $226,850$89,350 - $186,350$127,550 - $206,600$74,425 - $113,425
33%$226,850 - $405,100$186,350 - $405,100$206,600 - $405,100$113,425 - $202,550
35%$405,100 - $457,600$405,100 - $406,750$405,100 - $432,200$202,550 - $228,800
39.6%over $457,600over $406,750over $432,200over $228,800
*Caution: Do not use these tax rate schedules to figure 2013 taxes. Use only to figure 2014 estimates. Source: 2014 tax brackets http://www.irs.gov
Expected inflation rate
This is what you expect for the average long-term inflation rate. A common measure of inflation in the U.S. is the Consumer Price Index (CPI). From 1925 through 2013 the CPI has a long-term average of 3.0% annually. Over the last 40 years highest CPI recorded was 13.5% in 1980. For 2013, the last full year available, the CPI was 1.7% annually as reported by the Minneapolis Federal Reserve. Inflation rate is used to adjust amounts subject to annual increases. These amounts include rent, insurance and tax payments.
Home appreciates at
Annual appreciation you expect in the home you are purchasing.
Future sales commission
The percent of your home's selling price you expect to pay to a broker or real estate agent when you sell your home.
House payment
Total of principal, interest, taxes and insurance (PITI) and maintenance paid per month for your home. Insurance includes Principal Mortgage Insurance (PMI) and homeowner's insurance.
Initial tax savings
The value of the tax deduction you receive on your mortgage'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 $250 (at a tax rate of 25%).
Initial principal payment
Total of principal paid per month on your mortgage.
Net house payment
Your initial house payment minus the value of the tax deduction and principal payment.
Net home price
Net selling price of your home after subtracting any sales commissions.
Monthly payment (PI)
Monthly principal and interest payment.
Monthly PMI
Monthly cost of Private 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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