How to Use the Rent vs Buy Calculator

This tool helps you compare the financial outcomes of renting a home versus buying one. Here’s a step-by-step guide to using the calculator:

1. Input Fields

Fill in the following fields based on your current or expected financial situation:

• Monthly Rent: Enter your current monthly rent.
• Annual Rent Increase (%): Specify the expected annual rent increase. For example, enter "5" for a 5% increase.
• Home Price: Enter the price of the home you are considering buying.
• Down Payment (%): Enter the percentage you plan to pay upfront as a down payment (e.g., "20" for 20%).
• Mortgage Rate (%): Enter the annual interest rate on your mortgage loan (e.g., "8" for an 8% rate).
• Home Appreciation (%): Enter the annual increase in the home's value (e.g., "6" for 6% appreciation).
• Investment Return (%): Enter the expected return rate on investments (e.g., "8" for an 8% return).
• Number of Years: Enter the number of years you want to evaluate (e.g., "20" for 20 years).
• Annual Miscellaneous Costs (% of Home Price): Enter any additional costs related to owning the home as a percentage of its price (e.g., "1" for 1%).

2. Calculate

Once all fields are filled, click "Calculate". The calculator will perform the following:

Buying Analysis:

• Future Home Value: The projected value of the home at the end of the period.
• Total Cost of Buying: The sum of mortgage payments and additional costs.
• Net Gain from Buying: The difference between the future home value and the total cost.

Renting Analysis:

• Total Rent Paid: The total rent paid over the evaluation period.
• Future Value of Rent Investments: The projected value of the investment made by saving from renting.
• Net Wealth from Renting: The difference between the future value of investments and total rent paid.

Comparison:

• Net Gain/Loss: Shows the difference between the net gain from buying and the net wealth from renting.

3. Analysis

The Analysis section provides:

• Buying:
  • Future Home Value: The projected value of the home.
  • Total Cost of Buying: The total expenses for purchasing the home.
  • Net Gain from Buying: The profit or loss from buying.
• Renting:
  • Total Rent Paid: The total rent paid during the period.
  • Future Value of Rent Investments: The value of the investments made from renting.
  • Net Wealth from Renting: The wealth generated by investing the savings from renting.
• Net Gain/Loss Comparison: The overall comparison between buying and renting.

4. Chart

The chart visually shows:

• Wealth from Buying: How buying a home impacts your wealth over time.
• Wealth from Renting: How renting and investing savings changes your wealth over the same period.

The x-axis represents the number of years, and the y-axis represents wealth in Amount (instead of a specific currency).

5. Tips

• Ensure the values you enter are accurate and realistic to get meaningful results.
• Try adjusting the input values to see how different scenarios affect the comparison.
• Use the chart to better understand how your financial situation evolves over time with either option.

Assumptions

To ensure the accuracy and usefulness of this calculator, the following assumptions have been made:

1. Constant Rent Increase: Rent increases at a fixed annual rate over the entire period.
2. Fixed Mortgage Rate: The mortgage rate remains constant throughout the loan period.
3. Stable Home Appreciation: The home’s value appreciates at a fixed annual rate.
4. Investment Return Consistency: Investments made with savings from renting grow at a constant rate annually.
5. Annual Miscellaneous Costs: Homeownership costs, including maintenance, taxes, and insurance, remain constant as a percentage of the home price.
6. No Prepayments or Refinancing: Assumes no changes in the mortgage terms, such as prepayments or refinancing.
7. No Major Life Changes: Assumes no major life events (e.g., moving, selling the home) that might affect the calculations.

These assumptions are made to provide a simplified model. Real-world conditions may vary, and actual outcomes may differ.

Disclaimer

• Accuracy of Data: The Rent vs Buy Calculator provides estimates based on the input provided. While every effort has been made to ensure the accuracy of the calculations, the results are only estimates and should not be considered financial advice.
• External Factors: The calculations do not account for changes in personal financial situations, unexpected costs, or other variables such as inflation, tax changes, or market fluctuations.
• User Responsibility: Users are encouraged to verify the results with financial professionals before making any significant financial decisions.
• No Liability: The creators of this tool do not accept any liability for any decisions made based on the results generated by this calculator.

If you have any questions or need help, feel free to reach out for support. Happy calculating!