Is it Better for you to Rent or Own? 

Should you rent or should you buy your own home? For many years this has been an easy decision, it was everyone's dream to be able to buy a house and with low interest rates more and more people were able to afford it. Plus rapid appreciation in home values made owning almost a "no-brainer". But with interest rates rising and home prices going through the roof (no pun intended) it is becoming more difficult to justify a home purchase. Sometimes finding apartments for rent in Los Angeles or other big cities is cheaper than buying. With the recent housing bubble, some home owners are even considering selling and renting for a few years, hoping to repurchase at a lower price.

Of course, there are still emotional reasons to own your own home but... on strictly financial terms... you need to look at the various considerations in a logical manor and compare all the factors. That is where this Rent vs. Own calculator comes in very handy.

With this calculator you can look at all the financial benefits of ownership and compare them with the benefits of renting. Obviously the first two items you want to compare is the cost of rent versus your mortgage payment. But there is more to it than that. Ownership has benefits such as tax breaks which have to be considered.

This "rent vs. own calculator" doesn't just take a general number for your mortgage payment into consideration it uses your specific price, interest rate, property taxes, fees, points, everything.  It then allows you to compare that against a specific rent payment, your income tax rate, your estimation of the appreciation rate of your new home compared to what rate you can earn on the money if you invest it somewhere else besides in a home. The calculator even takes into consideration the expected inflation rate and the Real Estate sales commission.

The rent vs. own calculator then gives you four different ways to view the results.

  1. Monthly Payment Breakdown
  2. Projected monthly payments
  3. Home equity vs. other types of investment
  4. Use of Cash on Hand

It takes more than comparing your mortgage payment to your rental payment to decide whether it is better to rent or own. This calculator helps you weed through the fees, taxes, and monthly payments to help you make a good financial decision.  But in the end you still have to weight the intangible benefits like the feeling of ownership, versus the responsibility of taking care of the lawn and maintenance.  Interestingly this rent vs. ownership calculator doesn't take into consideration the cost of maintenance in its calculations.  So you might want to keep that in mind.

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.

Information and interactive calculators are made available to you as self-help tools for your independent use and are not intended to provide investment advice. We cannot and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.

Rent vs. OWN Calculator Definitions

Price of home: Purchase price of the home you wish to buy.
Cash on hand: Cash you have for the down payment 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 homeowner's insurance rate. 0.5% for a $100,000 home equals $500 per year for homeowner's insurance.
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 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 down payment: Total funds remaining for down payment.
Mortgage amount: Total amount of loan.
Investment return: Annual percentage return you would receive if you invested your closing costs and down payment 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.
Future 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 principal, interest, taxes and insurance paid per month for your home. Insurance includes PMI and homeowner.
Principal payment: Total of principal paid per month on your mortgage.
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 $280. (At a tax rate of 28%)
Net house payment: Your 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 PI: Monthly principal and interest payment.
Monthly PMI: Monthly cost of Principal Mortgage Insurance (PMI). For loans secured with less than 20% down, PMI is estimated at 0.5% of your loan balance each year.

More Articles:

How to find a Good Mortgage

Tips Regarding Interest Only Mortgage

Using the MIP to Decide- When to Refinance

Calculate Inflation using Inflation Calculators

Whether you rent or own your home, one consideration is the security of your home, your person and your belongings.  One way to do this is with ADT security just be sure to find a security system that covers all points of entry.

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