Rent vs Buy Calculator - Should I Rent Or Buy A Home?

Should I Rent Or Buy A Home - Help

Capital Gains Tax Exclusion

The capital gain from the sale of your main home that is not subject to capital gains tax. The maximum exclusion amount is generally determined by your tax filing status, but may be limited by other factors. In general, to qualify for the exclusion, you must meet both the ownership test and the use test.

Capital Gains Tax Rate

The capital gains tax rate is the rate at which your capital gains are taxed at. Your tax rate is determined by your income and other factors. Some or all of capital gains may not be subject to capital gains tax if the gain on the sale of your home is less than your capital gains exclusion amount.

Down Payment

The amount you can comfortably spend up-front when buying your new home to make up the difference between the purchase price of the home and your mortgage amount. Lenders may require that you have at least a minimum amount of cash reserves after making the down payment.

HOA Dues

Your Homeowners Association dues, if any, will be included in calculating your debt-to-income ratio which helps lenders determine the maximum mortgage loan amount you qualify for.

Homeowner's Insurance

Your insurance premium will be included in your debt-to-income ratio which lenders use to help determine the maximum mortgage loan amount you qualify for.

Home Value

The current market value of your home. At the time you buy a home this is often the purchase price of your home.

Home Value Inflation Rate

The expected average annual percentage change in the value of your home.

Income Tax Rate

Your marginal income tax rate is the rate at which any additional dollars of your income would be taxed at.

Inflation Rate

The average annual percentage rate at which the prices of goods and services change.

Interest

The portion of your mortgage payment that is due to the interest rate being applied to the principal balance. The Total Interest for a mortgage is the sum of all interest paid over the life of a loan.

Interest Rate

The percentage of the principal balance of your mortgage that determines how much interest you must pay. The interest rate on your mortgage may change or remain the same depending on the type of loan you have.

Investment Earnings

Your investment earnings are the average annual percentage rate you expect to earn on your investments.

Maintenance Costs

Your estimated annual maintenance cost.

Principal

The portion of your mortgage payment that is used to pay down the current balance of your mortgage. The principal balance represents how much you owe on the mortgage.

Private Mortgage Insurance (PMI)

Lenders often require borrowers to pay Private Mortgage Insurance (PMI) on mortgages with a loan-to-value ratio of more than 80%. PMI insures the lender in the event of a borrower default. Making a down payment of 20% or more of the purchase price of your home is one way you may be able to avoid being required to pay mortgage insurance.

Property Taxes

The property taxes on your home are included in the calculation of your debt-to-income ratio and in determining the maximum mortgage loan amount you qualify for.

Purchase Costs

Purchase costs as a percentage of the loan amount used to purchase your home, including lender fees, title fees, appraisal, inspection and other closing costs.

Renovation Cost

The cost of renovations as a percentage of your home's value. Renovations should add value to your home, prolong, its useful life, or adapt it to new uses. They do not include costs of repairs or maintenance that are necessary to keeping your home in good condition, but do not add to its value or prolong its life. Renovations and other qualified improvements, can add to the cost basis of your home, if they are still part of the home when you sell it. This can help taxpayers by limiting the taxable portion of capital gains on the sale of the home and possibly avoiding the capital gains tax entirely, if the renovation costs reduce the capital gain to below the capital gains exclusion amount.

Rent

The rent you can comfortably pay each month.

Rent Broker Fee

Renters in large cities, such as New York City, may have to pay a fee to a broker. Landlords in these area may require the use of a broker since they may be relying on brokers to vet potential tenants. Broker fees can be significant, for example, one month's rent or 15% of annual rent.

Rent Inflation Rate

The expected average annual percentage change in your rent.

Renter's Insurance

Your annual renter's insurance.

Security Deposit

A security deposit is any money a landlord takes from a tenant other than the advance payment of rent. The security deposit serves to protect the landlord if the tenant breaks or violates the terms of the lease or rental agreement. It may be used to cover damage to the property, cleaning, key replacement, or back rent.

Selling Costs

Selling costs as a percentage of the purchase price of your home, including real estate agent commissions.

Standard Deduction

The dollar amount that reduces your taxable income if you do not itemize deductions. The standard deduction is based on your tax filing status.

Tax Filing Status

Your tax filing status can be Single, Married Filing Jointly, Married Filing Separately, Head of Household, or Qualifying Widow(er) with Dependent Child. It can impact the tax benefits you receive, the amount of your standard deduction and the amount of taxes you pay. It may even impact whether you must file a federal income tax return.

Term

The amortization term is one of the key factors that determine your required mortgage payment. Your required mortgage payment for fully amortizing mortgages is the amount that would result in the mortgage being closest to being paid off by the end of the amortization term. Longer amortization terms result in lower required mortgage payments for fully amortizating mortgages, all other things being equal.

Utility Costs

Fees for basic services such as electricity, gas, water and trash pick-up.