Rent vs. buy calculator

We apply typical one-time costs and ongoing expenses that come with owning a home. Additionally, we make several assumptions about these costs and other factors that apply to homeownership.

Down payment: Depending on the type of loan, you'll need to make a down payment of at least 3 to 3.5% of the purchase price. This is an upfront payment due at closing that you must pay out of pocket.

Closing costs: These are fees charged to process and close your loan application. Examples of mortgage closing costs include title fees, recording fees, appraisal fees, credit report fees, pest inspection fees, attorney's fees, taxes and surveying fees.

Monthly mortgage payment: Your monthly mortgage payment includes principal, interest, property tax and homeowners insurance. Mortgage insurance is applied if the down payment is below 20%. Conventional mortgages use private mortgage insurance (PMI). As part of the loan guidelines set out by Freddie Mac, Fannie Mae and most investors in conventional loans, a borrower is required to pay PMI when at least 20% of a home's purchase price is not provided as a down payment.

With an FHA loan, if you make a down payment of less than 10%, you'll have to pay for mortgage insurance for the life of the loan. This is referred to as a mortgage insurance premium, or MIP. With down payments of 10% or more, you make MIP payments for 11 years. However, once you have 20% equity in the home, you can refinance to a conventional loan, where you won't pay mortgage insurance.

Assumptions
Here's everything we assume when calculating the cost of buying a home:

• This is a conventional mortgage with a fixed 30-year term.
• The purchase is for a single-family home.
• The home will be your primary residence.
• The lock period for your interest rate is 45 days.
• Your debt-to income ratio (DTI) is less than 45%.
• Your credit score is over 720, or in the case of certain Jumbo products, your credit score is over 740.
• You have an escrow account for payment of taxes and insurance.
• The loan-to-value ratio (LTV) is 97% or less.
• If LTV > 80%, private mortgage insurance (PMI) will be added to your monthly mortgage payment, with the exception of Military/VA loans. Military/VA loans do not require PMI.
• The value of a purchased home is based on the realized profit from the sale when sold that year.
• Other factors may include, but are not limited to, annual home maintenance costs, general inflation, home appreciation, capital gains tax, and costs associated with selling your home.

Sample scenario
Here's an example of how these costs and assumptions factor into the cost of owning a home.  

Scenario:  

Purchase price: $250,000  

Interest rate: 6.5%  

One-time costs:  

Down payment: $50,000 (20% of purchase price)  

Closing costs: $10,000 (4% of loan amount)  

Annual costs:  

Property taxes: $2,875 (1.15% of purchase price)  

Homeowners insurance: $1,200 (fixed amount)  

Homeowners association fees: $1,200 (fixed amount)  

Home maintenance: $2,500 (1% of purchase price)  

The total amount of all one-time and annual costs is $79,233.  

Next, subtract the net revenue from the mortgage balance. Based on our assumptions, if the home is sold after 1 year at a value of $257,950, then the estimated net revenue on the sale will be $239,991. The mortgage balance after 1 year is $200,949.  

$239,991 - $200,949 = $39,042  

Finally, subtract this amount from the total amount of one-time and annual costs:  

$79,233 - $39,042 = $40,191  

In this scenario, the estimated cost of owning a home after the first year is $40,191. Please remember that we don't have all your information. Therefore, the rate and payment results you see from this calculator may not reflect your actual situation. Rocket Mortgage offers a wide variety of loan options.

To get more accurate and personalized results, please call (888) 452-8179 to talk to one of our Home Loan Experts.

Calculating this cost isn’t as complicated. The only one-time cost you pay is a security deposit, which is typically equal to one month’s rent. Ongoing expenses for renting include your monthly rent payment and may include a yearly renters insurance premium.

Assumptions
Other factors that affect the cost of renting may include, but are not limited to, general inflation, home appreciation, rent appreciation and renters insurance. We assume a yearly renters insurance cost of $197 per year.

Sample scenario
Here’s an example of how these costs and assumptions factor into the cost of renting a home.

Scenario:
Rent: $1,000 per month

One-time costs:
Security deposit: $1,000 (Equal to one month’s rent)

Assumed costs:
Renters insurance: $197 per year

Multiply the monthly rent by 12 to get the annual rent. In the scenario above, this equals $12,000.

Next, add the security deposit and renters insurance to the annual rent. In total, the estimated cost of renting after the first year is $13,197.

Keep in mind: the security deposit only applies to the first year’s cost of renting because it is a one-time cost.