Compare Rent and Buy on the Same Basis
A useful comparison does not place rent beside principal and interest alone. It projects the cash flows and assets on both sides: mortgage amortization, taxes, insurance, maintenance, transaction costs, rent growth, home appreciation, and the possible return on cash that is not tied up in the home.
How This Model Works
- The buying scenario starts with the entered down payment and buying costs, then amortizes the mortgage monthly.
- Property tax, home insurance, and maintenance are estimated from the projected home value.
- The renting scenario invests the cash that would otherwise have been used for the down payment and buying costs.
- Each month, whichever scenario has the lower housing cost invests the difference.
- At the end, the model compares renter investments with home equity after the entered selling costs.
Read the Result as a Scenario
The output is sensitive to assumptions. Run a conservative, middle, and optimistic case instead of treating one result as a forecast. In particular, vary appreciation, investment return, years in the home, maintenance, and transaction costs. Taxes on investments or a home sale, renovations, financing changes, and local rules are not included.
The result is a planning estimate, not a recommendation to enter a lease or purchase a property.