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Rent vs. Buy Calculator

Not sure if you should buy or rent your next home? Amplify's Rent vs. Buy Calculator can help you build out your budget.

If you currently live in an apartment or rental property, you may be wondering when the time will come to buy a house. It can be hard to work out which option ends up being better for you in the long run, which is why we’ve built the Rent vs. Buy Calculator for prospective homebuyers. 

This tool will give you an idea of how much money you can expect to save (or lose) when you purchase a home, compared to renting one.

Important Terms to Know for the Rent vs. Buy Calculator

Need a little explanation? We’ve broken down terms in the calculator by the section that they fall under.

Buy information

Here’s how to fill out the information related to buying a home listed under “Buy Information.” 

Home price

The home price is the total cost of the home that you purchase. This price includes your loan amount, plus any down payment that you put down. 

Down payment 

The down payment is the initial payment that a borrower puts up when purchasing a house. Homebuyers will put a percentage of the home’s value down (usually anywhere between 5% to 20%) and borrow the rest from a lender.

Annual appreciation

Annual appreciation refers to how the value of a property increases over time. In general, values go up simply because real estate is in limited supply, and there is almost always a demand. However, exact appreciation rates are influenced by a combination of factors. Location, neighborhood, home size and usable space, age and condition, and general economic indicators all play a role in your home’s appreciation.

If you aren’t sure of your home’s annual appreciation rate, you can estimate by doing a little research on home values and trends in your area.

Annual property taxes

Annual property taxes are an ad valorem tax, meaning that they are based upon the property’s assessed value. This means that the amount you pay in property taxes is directly related to your home and land value and is calculated as a percentage. In the United States, taxes are levied on the local level by taxing units such as counties, school districts, cities, and special districts. 

Other annual expenses

Other annual expenses can be any additional recurring cost that you pay because you own a house. Examples of this include HOA dues, homeowners’ insurance, hazard insurance, and maintenance routines performed regularly. Do not include utilities or large one-time expenses like home renovations in this estimate. 

Loan rate

The interest rate, sometimes referred to as the loan rate, is what a lender charges you in exchange for being able to borrow their money. It’s calculated as a percentage of your total loan amount and is added to the principal balance of the loan.

The lender determines your loan rate. It can depend on several factors, including your credit score, home location, home price, loan type, and more.

Loan term

The loan term is the length of your home mortgage. Mortgages are typically repaid over a 30-year, 20-year, or 15-year period.

Deductible loan costs (points)

Mortgage points, which may also be referred to as discount points, are a type of fee paid to the lender at the time of closing. Purchasing points is often called “buying down the rate” since each point purchased lowers the interest rate of your mortgage by a quarter of a percent. One point will cost 1% of your mortgage amount. 

For example, if you have a $100,000 mortgage with a 4.5% interest rate, one point will cost $1,000. That point, however, will lower your rate to 4.25%. While you pay $1,000 up front, you can potentially save thousands in interest.

These are also considered deductible loan costs since they may be tax-deductible. According to IRS Topic No. 504“Points are prepaid interest and may be deductible as home mortgage interest, if you itemize deductions on Schedule A (Form 1040 or 1040-SR), Itemized Deductions (PDF). If you can deduct all of the interest on your mortgage, you may be able to deduct all of the points paid on the mortgage.” 

Other loan costs

Taking out a loan almost always comes with upfront costs, which are known as closing costs. In the calculator, this is referred to as “Other Loan Costs.” Closing costs are the general term for fees such as:

  • Loan application fee
  • Loan underwriting and origination fees
  • Home appraisal
  • Title search/insurance fee
  • Credit report fee
  • Settlement fee
  • Mortgage points

Typically, these costs range from 2% to 6% of the loan amount.

Selling costs (% of sales price)

When you purchase a home, you may bear some of the costs associated with the homeowner selling the house. A real estate agent’s commission is typically calculated as a percentage of the sales price. The standard commission rate is 6%. Though the seller normally pays this, they can negotiate this to where the buyer pays part or all of the agents’ commissions.

Rent Information

You’ll find these two terms under “Rent Information.”

Monthly rent

This is how much you spend on rent each month, not including utilities. If you pay a lease on an annual basis, divide your yearly lease payment by 12 to get the monthly cost.

Annual rent increase

Unfortunately, rent prices don’t always stay the same. Use the annual rent increase slider to estimate how much you anticipate rent going up per year, based on previous rent increases in your home or the area.

Financial assumptions

These are the information boxes listed under “Financial Assumptions.”

Years in home

Adjust this slider to see how savings change depending on the number of years you spend in a house that you buy.

Tax rate

Input the state or municipal tax rate to identify any additional tax fees you may pay on your property.

More Calculator Resources

Want more resources like this one to help your money matters in order? Be sure to check out Amplify Credit Union’s page of financial calculators. You’ll find handy tools to help you with everything from college savings to buying a new car to retirement.

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