How the Calculator Works

Our buy vs rent calculator uses real-world data and established financial models to project the full cost of buying a home against renting and investing the difference. Here is a detailed look at the methodology and data sources behind every number.

Home Buying Assumptions

The calculator defaults to the average US home price according to current market data. It uses the median household income from the U.S. Census Bureau as the default income figure.

The default down payment is 20% of the home price, which eliminates the need for private mortgage insurance (PMI). You can adjust the down payment percentage to see how PMI-level down payments change the outcome. The mortgage is modeled as a standard 30-year fixed-rate loan.

Homeowner costs include the monthly mortgage payment (principal and interest), an annual repair budget (defaulting to 1% of home value), and home value appreciation which you can adjust. Property taxes and homeowner's insurance are factored into the total cost of ownership.

Renting Assumptions

The default monthly rent is based on the average US rent from current market data. Rent is assumed to increase by approximately 3% per year on average, which aligns with long-term historical trends.

When renting, the money that would otherwise go to a down payment and the monthly cost difference between owning and renting is assumed to be invested in a diversified portfolio.

Investment & Savings Model

For both homeowners and renters, savings are modeled as invested in a portfolio consistent with the historic average return of an 80/20 stock/bond portfolio. You can adjust the savings return rate using the slider to model more conservative or aggressive investment strategies.

Default savings and monthly expenses are based on aggregated data from leading sources including the average US household savings and average household budget, which includes transportation, food, healthcare, entertainment, and education expenses.

What the Calculator Shows

The calculator produces three key comparisons over a 30-year period:

• Housing Costs — The cumulative amount spent on housing in each scenario. This includes mortgage payments, rent, repairs, and other housing-related expenses.
• Net Worth — Your total financial position, combining savings, investments, and home equity (for buyers). This shows which strategy builds more wealth over time.
• Liquid Savings — The amount of accessible cash and investments you would have. Home equity is not liquid, so homeowners typically have less flexibility here even if their net worth is higher.

Limitations & Disclaimer

This calculator provides estimates based on historical averages and your inputs. It does not account for every variable, including tax deductions (mortgage interest deduction, capital gains exclusion), local property tax rates, HOA fees, or life changes that could affect your housing needs. Market conditions vary by location, and past performance does not guarantee future results.

We recommend using the calculator as a starting point for your analysis and consulting with a financial advisor before making major housing decisions.