Rent vs Buy Inflation-Adjusted Decision Engine
This one-page, client-side tool turns the rent vs buy dilemma into a clear, numbers-first decision—fast. With minimal inputs, it simulates mortgage amortization, annual maintenance and property taxes, inflation-adjusted costs, and the “invest-the-difference” opportunity cost. You’ll see how total spending, equity gains, and purchasing power evolve over time, plus AI-generated insights and a practical action plan you can execute today.
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Rent vs buy: Minimal-input calculator
Enter your home price and current monthly rent. The tool uses smart defaults for mortgage rate, term, down payment, inflation, and investment returns. You can expand advanced options if you want to refine maintenance, taxes, appreciation, and HOA. Results update instantly—with charts, nominal vs real outcomes, and AI insights.
Advanced options
Visual comparison
Chart updated.
AI quick take
Adjust the home and rent values to see how total costs, equity, and invest-the-difference change over time. The AI insight below adapts to your scenario.
Results summary
We simulate two paths over your selected horizon. The rent path sums inflation-adjusted rent outflows and assumes you invest any monthly savings versus the buy path at your selected return. The buy path models a fixed-rate mortgage, property taxes, maintenance, and HOA, with home value appreciation and equity build through amortization. Both paths report nominal totals and real purchasing power adjusted by your inflation assumption.
Key outputs include: total housing costs, accumulated equity (home value minus remaining mortgage principal), and net wealth under each path (equity for buying vs invested savings for renting). The difference reveals whether owning or renting creates greater long-term purchasing power under your assumptions. Because rent often inflates faster than general CPI in some markets, investing the difference can be powerful—but so can building equity in an appreciating asset.
The chart displays cumulative net wealth of both paths month by month. Flags highlight cash flow stress (if buying outflows are much higher than renting), equity acceleration (if amortization and appreciation compound strongly), and inflation headwinds (if rent inflation erodes affordability). Use these signals alongside your tolerance for repairs, mobility needs, and neighborhood plans.
Results interpretation
Math and assumptions
Mortgage math: We use fixed-rate amortization. Monthly rate is \(r_m=(1+r)^{1/12}-1\). Payment is \(P = L \cdot \dfrac{r_m}{1-(1+r_m)^{-N}}\) where \(L\) is loan amount and \(N\) is months. Each payment splits into interest and principal, reducing the loan balance.
Inflation and rent growth: Rent grows at your rent inflation rate; nominal totals are discounted to real terms using \(V_{real} = V_{nom}/(1+i)^t\) with \(i\) as annual inflation and \(t\) as years. Property taxes and maintenance are a percentage of current home value, which appreciates at the selected rate.
Invest-the-difference: When the buy path’s monthly cash outflow exceeds renting, the rent path assumes you invest that savings at your selected return. If buying is cheaper monthly, the difference is set to zero (no negative investment). This approximates the opportunity cost and shows how disciplined investing can shift outcomes.
Trade-offs in plain language
- Equity vs flexibility: Buying builds equity but reduces mobility; renting offers flexibility with fewer surprise costs.
- Cash flow reality: Mortgages add fixed obligations, taxes, and maintenance. Ensure your budget can absorb shocks.
- Inflation dynamics: Rent often climbs; fixed-rate mortgages can stabilize housing costs over time.
- Opportunity cost: If renting costs less, investing the savings can rival or beat home equity under certain assumptions.
Backlinks and references
For deeper learning, explore: Investopedia: Mortgage Math, Opportunity Cost, SEC Investor Education, Vanguard Education, and Bogleheads Wiki.
Internal anchors: jump to the action plan, browse the latest 10 tools, or review expert quotes on disciplined decisions and long-term wealth building.
Step-by-step action plan
- Clarify horizon: If you expect to move within 3–5 years, renting may preserve flexibility; longer horizons favor buying’s equity compounding.
- Stress-test cash flow: Add a maintenance buffer and ensure total monthly housing costs fit your budget after essentials and savings goals.
- Automate investing: If renting is cheaper, auto-invest the difference monthly to capture compounding consistently.
- Factor local taxes: Property tax rates vary; update assumptions for your location and check exemption thresholds.
- Consider HOA and insurance: HOA dues and homeowner’s insurance can materially change buy-side math.
- Revisit annually: Update rent inflation, appreciation, and rates; market shifts can change the winner.
- Negotiate and compare: Shop mortgage offers and negotiate rent renewals; small rate differences have big long-term effects.
Risk and compliance notes
This tool is educational and based on user inputs and simplified assumptions. It is not investment or housing advice. Real outcomes
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