How to Use the Rent vs. Own Calculator

This calculator helps you compare the financial implications of renting versus buying a home over time. It's divided into four intuitive tabs that guide you through the comparison process.

Navigation Basics

The calculator has four main sections accessed via tabs at the top:

• Buy: Enter details about purchasing a home
• Rent: Input rental information and investment assumptions
• Results: View a comprehensive financial comparison
• Chart: Visualize the long-term financial impact of both options

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Buy Tab

In this section, you'll enter all the details about purchasing a home:

1. Home Price: Use the slider or text field to set the purchase price (ranges from $100,000 to $2,000,000)
2. Down Payment: Choose your down payment percentage (5%, 10%, 15%, 20%, or 25%)
   • The calculator automatically calculates the dollar amount based on your selection
3. Interest Rate: Enter the mortgage interest rate percentage
4. Mortgage Term: Select from 15, 20, or 30-year mortgage options
5. Property Tax Rate: Input the annual property tax percentage based on your location
6. Home Insurance: Enter the yearly home insurance cost
7. Maintenance: Estimate annual maintenance costs for the property
8. Appreciation: Set the expected annual home appreciation percentage

The tab displays your estimated monthly mortgage payment at the top for quick reference.

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Rent Tab

This section captures details about the rental scenario:

1. Monthly Rent: Set your current or expected monthly rent using the slider or text box
2. Annual Rent Increase: Enter the expected yearly percentage increase in rent
3. Renters Insurance: Input your annual renters insurance cost
4. Investment Return Rate: Set the expected annual return percentage on investments
   • This is crucial as the calculator assumes you invest the difference between renting and buying costs, plus the amount you would have used for a down payment
5. Time Horizon: Use the slider to select your comparison timeframe (1-30 years)
   • This determines how long you plan to stay in the home or rental

At the top, you'll see your total monthly rent plus insurance costs for quick reference.

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Results Tab

After entering your data, this tab provides a comprehensive financial comparison:

1. Cost Comparison: Total costs of owning versus renting over your selected time period
2. Net Worth Comparison:
   • Buying Net Worth: Your home equity after the time period
   • Renting Net Worth: The value of your investments after the time period
3. Final Comparison: Shows which option is financially better and by how much
4. Key Assumptions: Lists the critical assumptions used in the calculations

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Chart Tab

This visualization tab helps you understand the long-term trends:

1. Net Worth Comparison Chart: Shows how your net worth in both scenarios changes over time
   • Blue line represents buying
   • Purple line represents renting
2. Final Year Values: Displays the end result with exact numbers for both scenarios
3. Difference: Visual representation of the gap between the two options
4. Break-even Analysis: Identifies if and when one option becomes better than the other

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How to Interpret the Results

1. If buying shows higher net worth: The appreciation of your home and equity building through mortgage payments outweighs the costs and opportunity cost of your down payment.
2. If renting shows higher net worth: The investment returns from the money you didn't tie up in a home outweigh the benefits of homeownership.
3. Break-even point: Pay special attention to when (if ever) the lines cross on the chart, as this indicates when one strategy becomes more favorable than the other.

The calculator helps you make an informed decision based on your specific financial situation, local housing market, and investment opportunities, allowing you to look beyond the simple rent vs. mortgage payment comparison.