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Rent vs Buy Calculator

Our ARM mortgage calculator will help you determine the total cost or your mortgage that you will pay over the term of your loan. There are trade-offs to adjustable rate mortgages. Home buyers may be attracted to the lower interest rates and willing to risk having their interest rate increase or decrease over the loan term. The ARM loans are usually repaid over a 30 year period, but monthly payments may increase or decrease over that term, depending on the movement of interest rates.

How to use the Rent vs Buy Calculator

Are you considering buying your first home? A rent vs buy calculator helps those debating the pros and cons of renting and buying property. It takes into account several factors in order to best assess your comprehensive financial situation. Essential figures include:

  • How much you want to spend on your home
  • The size of the down payment you can afford
  • Preferred length of your loan term
  • Ideal rate on said loan
  • Property taxes of the area
  • Other financial information such as a vehicle, credit cards, student loan, and other payments that affect your finances.

This calculator is designed to help you understand your unique position and provide a holistic approach to the question of whether you should continue to rent, or if buying a home is right for you.

Resources

Glossary of terms

Home Price

The sum for which a home is bought or sold. This does not include the extra payments made to third parties or the other costs of buying and owning a property.

Taxes

Buying and owning a property means paying a property tax based on its value, including land, if applicable. These taxes can include tangible personal property such as cars or boats, making property taxes slightly different from real estate taxes, which only tax real property like a house.

Closing Costs

The money owed to third-party professionals such as real estate attorneys or mortgage lenders who helped you buy the home, paid before finalizing a sale. The amount owed in closing fees varies depending on your situation and location, but they usually amount from 3% to 6% of the property’s purchase price.

Maintenance and Fees

The fees involving maintenance, repairs, and upkeep of a property. If you rent, your landlord takes responsibility for maintenance and repairs, while you keep the property in good condition. If you buy a property, you handle repairs, maintenance, and upkeep yourself. The cost of an HOA membership may cover some of these services.

Mortgage Rate

The amount of interest paid on a mortgage. Mortgage interest rates can stay fixed or can fluctuate. If the purchaser has a high credit score, the lender lowers the rate because they risk less by loaning the money. The risk and rate correlate: the higher the risk of loaning the money, the higher the mortgage interest rate.

Down Payment

A down payment covers a certain percentage of the purchase price of a house that you pay upfront. If you buy a home, a down payment can range from 3.5% to 25% of the home’s total value, and a bank or other lender covers the rest of the cost. A higher down payment decreases the amount of interest paid when you pay the regular installments on your loan.

Insurance

Homeowners insurance covers losses and damages to a home, such as interior and exterior damage, loss or damage of assets, and injury while on the property. Renter’s insurance protects people living in a rented property, covering unexpected events, repairs, and replacements to personal property. Both home insurance and renter’s insurance also include liability coverage.

Stay in Area

The length of time you plan to stay in the location where you rent or buy your home. Knowing how long you want to stay in a particular location will enable you to make a more informed choice about whether to rent vs buy a home, with renting suited toward short-term stays and buying preferred by people who want stability.

Commonly Asked Questions

For most buyers, obtaining a mortgage and buying a home is the largest financial undertaking they will complete in their lifetime. Homes appreciate in value and are typically considered a sound investment for most applicants.

But committing to repay a large amount of money can be confusing. Let’s look at the most commonly asked questions that pop up during the process.

The decision to rent or buy a house presents a personal decision with pros and cons that need consideration before you can make a final call. Not only do finances play a significant role in renting and buying a home, from your income and savings to the amount of money needed upfront, additional fees, and total cost, but your preferred lifestyle influences your decision. The location of the property also matters as certain cities have higher rent or property prices on average than other cities. One option may work better than the other solely based on the city you live in.

Conclusion

In conclusion, the primary factors for mortgage approval are credit score, income, existing debt, and down payment. As a savvy consumer, you can run scenarios with various inputs to find the right mortgage lending solution for you.

Once you procure a mortgage, be sure to pay your payments on time and include extra principal payments as available. These actions will ensure you are able to refinance should mortgage rates become more desirable.

Home-ownership is a journey and a dream for most Americans. Use the research we’ve compiled to make the most of your adventure toward owning a home.