How this calculator works, in full
Every formula, every default and every tax rule the model applies - plus a plain statement of what it deliberately does not measure. If you find an error, it gets fixed and credited.
1. The model
The calculator runs a month-by-month simulation over the length of your stay, then asks a single question: if you sold up and walked away at the end, which path leaves you holding more cash?
Both paths pay their real costs
Each month the owner pays mortgage interest, principal, property tax, insurance, maintenance, HOA and mortgage insurance. The renter pays rent and renter's insurance.
Whoever spends less invests the difference
This is the step most calculators skip. If owning costs more this month, the renter invests the gap. If renting costs more, the owner invests it. The comparison is symmetric in both directions.
Everything grows at its own rate
The home appreciates, rent grows, property tax grows, insurance and upkeep inflate, and investments compound at the return you set minus the fund expense ratio.
Both sides sell up at the end
The owner sells - paying selling costs and any capital-gains tax above the exclusion - and clears the remaining loan. The renter liquidates the portfolio and pays capital gains, and gets the deposit back. Those two net figures are what you see.
2. What counts as the cost of owning
Mortgage interest and principal on a fully amortising loan, property tax, home insurance, maintenance as a percentage of home value, HOA dues, and mortgage insurance while the loan is above 80% of the purchase price. Closing costs are paid up front; selling costs come out of the sale.
Principal is not treated as a cost. It moves from your cash to your equity, which is why the money breakdown shows it in the accent colour rather than the cost ramp.
3. What counts as the cost of renting
Rent, renter's insurance, and the security deposit, which is returned at the end. Rent grows each year at the rate you set. The rent you enter must be for a place genuinely comparable to the home you are pricing - same bedrooms, same area, same parking. Comparing a studio to a four-bed house is the single easiest way to make this calculator lie to you.
4. Taxes
The model itemises only when itemising beats the standard deduction, and it applies the mortgage-interest cap, the SALT cap, capital-gains tax on invested gains for both paths, and the Section 121 exclusion on the home sale. Every threshold is editable, because they change and because they differ outside the US.
| Rule | Applied as | Default |
|---|---|---|
| Standard deduction | Itemise only when it beats this | $16,100 |
| Mortgage interest cap | Interest deductible on loan up to | $750,000 |
| SALT cap | Property tax deduction limited to | $40,400 |
| Marginal tax rate | Applied to any deduction benefit | 24% |
| Capital gains | On invested gains, both paths | 15% |
| Section 121 exclusion | Home-sale gain excluded (single) | $250,000 |
5. The defaults, and where they come from
Defaults are a starting point, not a claim about your market. All of them are editable on the calculator, and the answer recomputes as you type. The headline figures these defaults produce - the tipping rents, the ten-year gaps, the ratio matrix - are collected on one citable page, every one recomputed from the engine rather than typed by hand.
| Assumption | Default | Why this value |
|---|---|---|
| Home price | $420,000 | Near the US median sale price |
| Comparable rent | $2,100/mo | 0.5% of the home price per month - a typical US ratio |
| Mortgage rate | 6.5% | Mid-2026 30-year territory; always set your quote |
| Stay length | 10 years | Long enough to amortize the transaction costs |
| Down payment | 20% | The conventional threshold at which mortgage insurance stops |
| Mortgage term | 30 years | The dominant US product |
| Closing costs | 3% | Mid-point of the typical 2-5% range |
| Selling costs | 6% | Agent commission plus transfer costs |
| Property tax | 1.1% /yr | Near the US median; varies hugely by state |
| Maintenance | 1% /yr | The common 1%-of-value rule; older homes cost more |
| Home appreciation | 3% /yr | Long-run US average, not a forecast |
| Investment return | 7% /yr | Long-run nominal equity return before fees |
| Fund expense ratio | 0.05% /yr | A cheap index fund |
| Rent growth | 2.5% /yr | Slightly above target inflation |
| PMI | 0.6% /yr of the loan | Charged below 20% down; cancels at the 80% line |
| Home insurance | $2,500/yr | A typical US premium; set your quote |
| Renter's insurance | $15/mo | The renter pays to insure possessions too |
| Security deposit | 1 month | Cash the renter parks, returned at the end |
| Property tax growth | 2% /yr | Assessments drift up with values |
| Inflation | 2.5% /yr | Applied to insurance, HOA and upkeep |
6. The tipping rent
The tipping rent is the monthly rent at which both paths end the stay exactly level. It is found by binary search - the model re-runs the whole simulation against different rents until the difference converges to zero - not by a rule of thumb.
At the current defaults
On a $420,000 home at 6.5% over 10 years, the tipping rent is $2,468 a month - 0.59% of the home price per month. Below it, renting and investing the difference ends ahead.
Note that this is expressed as a share of the home price, not of the loan. The two differ by the size of your down payment, and quoting the loan-based figure overstates the tipping point by roughly a fifth at a 20% deposit.
7. What this does not measure
The number this page produces is a net-worth comparison and nothing more. It is not a statement about what you can afford, what you can be approved for, or what you should do.
Not modelled
- Whether you qualify for the mortgage at all
- Job loss, illness, or having to move early
- Special assessments, major structural repairs
- Landlord risk - eviction, non-renewal, a bad building
- What the home is worth to you beyond money
Assumed, not predicted
- Home appreciation is a fixed annual rate, not a forecast
- Investment returns are smooth; real markets are not
- Rent grows steadily; real rent moves in steps
- You stay exactly as long as you said you would
- You actually invest the difference, every month
Ahead is not the same as affordable, and not the same as safe. A path can win this comparison by a wide margin and still be the wrong choice for you.
8. Errors and changes
The engine is open source and covered by automated tests, including scenarios worked by hand to check it. If you find a mistake, send it over - corrections are made publicly and the changelog records what changed and when. The model is maintained by Jonathan Nyst. A good error check is disagreement: run the same scenario in another tool - we keep an honest comparison of the major calculators - and chase down which assumption explains the difference.