🏡 Rent to Mortgage Calculator

Usually yes, BUT you need cash for down payment and closing costs.

Example: $2,000/mo rent payment

Affordable home price with 20% down: ~$360K

• Monthly P&I: $1,515
• Property tax (1.2%): $360
• Insurance: $125
• Total: $2,000/mo

BUT you need upfront:

• 20% down payment: $72,000
• Closing costs (3%): $10,800
• Total cash needed: $82,800

With less down (10% down on $360K home):

• Down payment: $36,000
• Closing costs: $10,800
• PMI: +$200/mo
• Total monthly: $2,200/mo
• Cash needed: $46,800

The trade-off: Higher monthly payment but half the cash needed upfront.

Homeownership hidden costs (budget these!):

One-time costs at purchase:

• Down payment: 3-20% of price
• Closing costs: 2-5% of price
• Moving expenses: $1,000-3,000
• Immediate repairs/improvements: $2,000-10,000

Ongoing monthly costs (beyond mortgage):

• HOA fees: $0-500/mo depending on area
• Utilities: Often higher than apartments ($200-400/mo)
• Lawn care/maintenance: $50-200/mo
• Homeowners insurance: $100-200/mo

Annual costs (save monthly for these):

• Maintenance/repairs: 1% of home value ($4K/year on $400K home)
• HVAC servicing: $200-500/year
• Pest control: $300-600/year
• Roof/major systems: $500-1000/year sinking fund

Total hidden costs: Add $400-800/mo to your mortgage payment for true cost.

What you DON'T pay as homeowner:

• Rent increases (fixed mortgage)
• Pet rent/deposits
• Parking fees
• Amenity fees

Equity comes from 3 sources: payments, appreciation, and forced savings.

Example: $360K home, 20% down, 7% rate, 3% annual appreciation

Year 1:

• Payments toward principal: $4,200
• Home appreciation (3%): $10,800
• Total equity gain: $15,000
• Total paid in: $24,000 ($2,000 × 12)

Year 5:

• Principal paid down: $28,500
• Home appreciation: $57,300 (compounded)
• Total equity: $85,800
• Total paid in: $120,000

Year 10:

• Principal paid down: $66,800
• Home appreciation: $124,500
• Total equity: $191,300
• Total paid in: $240,000

Compare to renting:

• $2,000/mo × 120 months = $240,000 paid
• Equity built: $0
• Net worth increase: $0

Homeownership after 10 years: $191K richer
Renting after 10 years: $0 richer

Rent if:

1. Moving within 5 years

• Closing costs ($10K-20K) not recouped in short term
• Real estate fees to sell (6%) = $24K on $400K home
• Break-even typically 5-7 years

2. Can't afford 10%+ down payment

• Less than 10% down = high PMI costs
• Less than 5% down = very expensive
• Better to save more first

3. Job/income instability

• Risk foreclosure if can't make payments
• Hard to sell quickly if must relocate
• Rent gives flexibility

4. High price-to-rent ratio market

• If homes cost 25+ years of rent, market may be overpriced
• Example: $2K/mo rent, homes selling for $600K+ = might be bubble
• Rent and wait for market correction

5. Not ready for maintenance responsibility

• Rental: Landlord fixes everything
• Ownership: You're on the hook for $5K HVAC replacement
• Need emergency fund of $10K-20K

6. Lifestyle flexibility more valuable

• Frequent travelers
• Career requires relocating
• Exploring different cities/neighborhoods

Buy if: Staying 5+ years, stable income, 10%+ down saved, ready for maintenance, want to build wealth.

It's valuable but often overstated. Here's the real math:

Example: $320K loan at 7% interest

Year 1 interest paid: ~$22,000

Standard deduction (2024): $27,700 married

Scenario A - Rent:

• Take standard deduction: $27,700
• Tax bracket 24%
• Tax savings: $6,648

Scenario B - Own (itemize):

• Mortgage interest: $22,000
• Property tax: $4,800
• State income tax: $8,000
• Total itemized: $34,800
• Tax savings at 24%: $8,352

Benefit of owning: $8,352 - $6,648 = $1,704/year = $142/month

So mortgage deduction saves you ~$140/mo, not $450/mo (which is common misunderstanding).

It gets worse over time:

• Year 5 interest: $20,500 (less principal, more interest)
• Year 10 interest: $18,200
• Eventually better to take standard deduction

Bottom line: Deduction is a nice bonus ($100-200/mo), but not the main reason to buy. Equity building and appreciation matter way more.

Simple test: Price-to-rent ratio

Formula: Home price ÷ (Annual rent × 12)

Example 1: $2,000/mo rent

• Similar homes sell for $360K
• $360,000 ÷ ($2,000 × 12) = $360K ÷ $24K = 15
• Ratio: 15 = Buying strongly favored

Example 2: $2,500/mo rent

• Similar homes sell for $800K
• $800,000 ÷ ($2,500 × 12) = $800K ÷ $30K = 26.7
• Ratio: 26.7 = Renting favored

Guidelines:

• Under 15: Buying is a great deal
• 15-20: Buying usually better long-term
• 20-25: Could go either way, depends on your situation
• Over 25: Rent is likely better unless staying 10+ years

Your rent is probably too high if:

• Price-to-rent ratio under 18 in your area
• Rent increased 20%+ in past 2 years
• Similar mortgages cost less than rent
• You're paying for location but not using it
• Rent + savings would cover mortgage + maintenance

Consider buying when: You have 10%+ down saved, price-to-rent under 20, planning to stay 5+ years, stable income.