Is it cheaper to rent or buy a home?

Nationally, at today’s prices and rents, buying would be cheaper than renting until the 30-year fixed rate reaches 10.5%. San Jose has the lowest mortgage rate “tipping point” at 5.2%, followed by San Francisco and Honolulu.


Annual Property Tax: This varies by locality. We use the actual average property tax rate for your metro area. You can also input your personal property tax rate as a percent of your home’s value or a national baseline assumption of 1.35%.

Buying Closing Costs: Include loan origination fees, mortgage points, title insurance, appraisal, escrow deposit, fees for running a credit report, and other closing costs.

Discount Rate: The opportunity cost of your money. It reflects what your money would earn as savings or investments other than housing. The higher the discount rate, the more expensive homeownership is because buying a home involves a big upfront payment.

Down Payment: The share of the purchase price you pay upfront. Our baseline assumption is 20%. Putting less than 20% down typically requires mortgage insurance, which is not included in this calculator.

Homeowner Condo/HOA Fees: This is for monthly condominium or homeowners’ association fees, or any other additional costs of owning not captured elsewhere.

Homeowner’s Insurance: Typically required by mortgage lenders. We assume an annual cost of 0.46% of the home’s value. Homeowners insurance could be significantly higher if you pay high premiums for risk factors such as floods or earthquakes.

Inflation: Impacts costs such as utilities and renovations, which we assume increase at the rate of inflation.

Long Term Capital Gains Tax: Assessed if the sale price exceeds the original purchase price by $500,000 if filing as married, or $250,000 if filing as an individual. We have assumed a 15% tax rate. Your tax situation might be different.

Mortgage Term: The number of years until the mortgage is paid off. Our baseline assumption is 30 years. Some mortgages have shorter terms such as 15 years.

Renovations: Both regular maintenance and home improvement. We assume homeowners pay 1% annually of the home’s value, although this can run significantly higher.

Rent Appreciation: The amount that your rent is likely to increase each year.

Rent Insurance: A policy that covers your personal possessions against perils such as fire, theft, or vandalism. We assume this is 1.32% of your monthly rent. This is not a required cost.

Price Appreciation: The amount that your home is likely to appreciate in value each year, but – be warned — appreciation is volatile and unpredictable. We make a conservative assumption for each metro area, based on long-term and recent local trends, typically 2-3% per year. This is nominal, not real, appreciation.

Selling Closing Costs: Include the real estate agents’ commissions, transfer taxes, title insurance fees, and other closing costs when selling a home.

Additional Utility Cost for Homeowners: Water, electric, and sewage are often higher for homeowners than for renters. We assume you would pay $100 per month more in utilities as a homeowner than as a renter.