Rent vs. Buy Calculator

Should you buy or rent a house?

With our simple rent vs buy calculator, Vill Fields can help you decide whether it is best for you to buy or rent.

How Can You Use the Rent vs Buy Calculator?

Our buy vs rent calculator can help you figure out how much you could save in the long run, whether you're comparing different prices or planning for the future. Note that rent costs, interest rates, property taxes, and insurance can change over time. Consider this before using the calculator. When using the rent or buy calculator, it's a good idea to try out different numbers to see how the results change.

Should You Rent?

You only need to enter two main pieces of information to start on the rent side:

1. How much rent do you pay each month

2. The cost of your renter's insurance every year, if you have it

That's all it takes to find out how much it might cost to rent a house over time.

If You Want to Buy

There are a few more things you need to add for the buying side:

1. How much does the house you want to buy cost

2. The amount of your down payment

3. Property taxes every year

4. Home insurance once a year

5. The duration of the loan (how long your debt will be)

6. How much does your home loan cost each month

7. Any monthly HOA fees (split the amount by 12 if you pay them once a year).

The rent vs buy calculator will show you how much you'll spend in both scenarios after you put in all of your information. Changes over the long term are also taken into account. For example, how the land value might go up or how the rent might go up (the calculator usually assumes a 2% rent increase each year, but this can change depending on where you live).

How to Understand the 5% Rule?

The 5% rule may be familiar to you. A simple way to figure out if it's better to buy or rent.

How it works

Take the home price and multiply it by 5%. Then, split that number by 12. This tells you how much it will cost you each month to own (not including the debt). If this number is less than your current rent, it might be better for your finances to buy instead of rent.

For instance, let's say the house you want to buy costs $250,000.

5% of $250,000 is $12,000.

Now divide $12,500 by 12 to get $1,041.67.

The 5% rule suggests that you may be better off buying if you're paying more than $1,041 per month in rent. Just remember that this rule isn't a guarantee. It's simply a good starting point for comparing prices.

When you buy a house, how do mortgages work?

If you want to buy a house, you can obtain a mortgage. You borrow money from a lender and agree to repay it over a specified period, typically 15, 20, or 30 years. The monthly mortgage bill includes loan payments, interest, property taxes, and home insurance. There may be HOA fees put on top of that.

Mortgages last longer than other loans. This means you have to make a big investment, but it also gives you more power over your monthly housing costs than rent, which can go up every year.

How to Make a Rental Agreement for a House?

A lease for one year is what most people sign when they rent a house. You can do this if you don't want to settle down or if you move around a lot. The owner is in charge of things like property taxes, roof repairs, and yard care, so renters don't have to worry about those.

You can also improve your credit and save money for a down payment while renting. Paying your rent on time every month demonstrates your responsibility with money, which can help you secure a mortgage when you're ready to buy a house.

Things to think about before you buy or rent

This calculator for buy vs. rent is helpful, but it's not the only thing you should think about. Things are different for everyone.

Here are some more things to think about!

· Are you going to stay in one place for five years or more?

· Have you saved up enough for the down payment and the fees that come with closing?

· Is your job safe, or do you want to change careers?

· Does the house need to be fixed up or changed?

· Are you ready to keep up with home maintenance?

If you need short-term flexibility or want to save money, renting might be a good option. However, if you prefer security and want to build wealth over time by owning a home, buying might be a better choice.

To learn more about your alternatives, use our rent vs buy calculator. It's a good way to find the best home for your price and way of life, whether you're just starting out or looking for your dream home.