How we calculate
RentBreak compares the real cost of renting vs buying over the number of years you plan to stay. Here’s what we include and how we do it.
What we include when you buy
- Principal and interest (P&I) — Standard mortgage amortization using your loan amount, rate, and term (15 or 30 years).
- PMI — Monthly PMI if you enter it (e.g. when down payment is under 20%).
- Property tax — Your annual property tax, spread monthly.
- Insurance — Annual homeowners insurance, spread monthly.
- HOA — Monthly HOA fee if you enter one.
- Maintenance — A percentage of the home’s value per year (e.g. 1–2%) to approximate repairs and upkeep.
- Tax benefit — We subtract an estimate of the mortgage interest and property tax deduction (using your marginal tax rate) from your monthly buy cost. So the “monthly cost (buy)” is an after-tax-style number.
What we include when you rent
- Rent — Your current monthly rent.
- Rent growth — We assume rent increases each year by the rate you enter (e.g. 3% per year). Total cost of renting over your horizon is the sum of those growing payments.
Break-even and recommendation
- Total cost of buying — Down payment plus all monthly buy costs over your stay, minus the equity you’d have at the end of the period (we estimate equity using your home appreciation assumption).
- Total cost of renting — Sum of all rent payments over the period, including rent growth.
- Break-even — The year (if any) when total costs of buying and renting cross. Before that, renting is cheaper in our model; after that, buying is.
- Recommendation — We say “Buy” or “Rent” based on which total cost is lower over your time horizon.
Assumptions you control
You choose:
- Rent growth (% per year) — How much you expect rent to rise (e.g. 3%).
- Home appreciation (% per year) — How much you expect the home’s value to grow (e.g. 3%).
- How long you’ll stay (years) — Your planning horizon. Results depend a lot on this.
- Marginal tax rate (%) — Used only for the interest/tax deduction estimate.
FAQ
- Does this include closing costs? You can enter one-time closing costs in the calculator (optional field). If you leave it blank, we use about 3% of the home price as a default. We don't include selling costs when you move.
- Why is my break-even so far out? Break-even depends on your numbers: high rent and low buy cost (e.g. low rate, long stay) move it earlier; low rent, high buy cost, or short stay move it later. Try changing "How long you'll stay" or "Rent growth" to see how sensitive the result is.
- What if I don't know my marginal tax rate? Use your top federal tax bracket (e.g. 22% or 24%). The tax benefit only affects the "monthly cost (buy)" estimate; the overall recommendation often doesn't change much.
- Can I use this for a refinance? You can approximate by setting "Monthly rent" to your current housing cost (e.g. current mortgage P&I) and "Home price" to the value you're refinancing. It's not built for refi specifically, but the idea is similar.
Disclaimer
This calculator is for educational and planning use only. It is not financial, tax, or legal advice. We don’t account for every factor (e.g. closing costs, selling costs, opportunity cost of the down payment, or changes in your life). Use it as one input to your decision, and consult a professional for advice tailored to you.