How to use it
- Enter the home price, the down payment and the mortgage rate and term.
- Enter the running costs of owning: property tax and maintenance as a percent of the home value each year, and insurance as a yearly amount.
- Enter the monthly rent, how much it rises each year, and the return you would expect on invested money.
- Enter how many years you plan to stay.
How it works
The model runs month by month. The mortgage payment is the level-payment amount for the loan; tax and maintenance are a share of the home’s current value divided by 12; insurance is a flat yearly amount divided by 12. The home value and the rent both grow once a year at their own rates (the home in monthly steps). Savings grow at the yearly return divided by 12. Whoever has the lower monthly outflow invests the gap, so the two sides have the same total budget. Net worth when buying is the home value minus the loan balance plus savings; when renting it is the investments.
Worked example
A 400,000 home with 80,000 down, a 6.5% 30-year mortgage, 1.1% property tax, 1,500 insurance, 1% maintenance and 3% price growth, against rent of 2,200 rising 3% a year and a 5% investment return, over 10 years. The mortgage payment is 2,022.62. Buying costs 435,327.72 in total and renting 302,646.41, but the home is then worth 537,566.55 with 271,283.60 still owed. Net worth is 266,282.95 buying and 203,118.71 renting, so buying is ahead by 63,164.24 in this model.
Tips
- Run it for the shortest time you might stay as well as the likeliest.
- Set the home price growth to 0 to see the result with no market gains.
- The model does not include selling costs; subtract a few percent of the final home value from the buyer to approximate them.
This is a simplified comparison to explore assumptions, not financial advice.