Calculation Methodology

Transparency is key. Here is exactly how we calculate the financial outcome of renting versus buying.

1. The Core Comparison

We compare the Total Net Wealth at the end of your specified time horizon.

• Buyer's Net Wealth: Home Equity (Home Value - Remaining Mortgage) - Selling Costs.
• Renter's Net Wealth: Investment Portfolio Value (Initial Savings + Monthly Savings compounded annually).

2. Buying Costs

We account for:

• Upfront: Down payment and closing costs (typically 2-5% of home price).
• Recurring: Mortgage principal & interest, property taxes, homeowners insurance, HOA fees, and maintenance (typically 1% of home value/year).
• Selling: Agent commissions and closing costs (typically 6-10% of final home value).

3. Renting Costs & Investments

We assume:

• Rent: Increases annually by the specified inflation rate.
• Insurance: Renters insurance is included.
• Opportunity Cost: The cash you didn't spend on a down payment is invested immediately. Any monthly savings (if renting is cheaper than buying) are also invested monthly.

4. Tax Implications

We calculate the potential tax benefit of buying by comparing the standard deduction against itemized deductions (Mortgage Interest + Property Taxes, capped at $10k SALT limit). If itemizing is greater, the difference multiplied by your marginal tax rate is considered a "saving" for the buyer.