1. What is a Mortgage and Rental Calculator?

Definition: This calculator compares the costs of buying a home with a mortgage versus renting a property over the same period.

Purpose: It helps individuals make informed financial decisions about whether to buy or rent based on their specific circumstances.

2. How Does the Calculator Work?

The calculator performs two main calculations:

• Mortgage Calculation: Computes monthly payments and total cost of home ownership including principal, interest, and down payment
• Rental Calculation: Computes total rental costs over the same period

Key Formula (Mortgage Payment): \[ M = P \times \frac{r(1 + r)^n}{(1 + r)^n - 1} \] Where:

• \( M \) — Monthly mortgage payment
• \( P \) — Loan principal amount
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Number of payments (loan term in years × 12)

3. Importance of Mortgage vs. Rent Comparison

Details: Understanding the long-term financial implications helps in making one of life's most significant financial decisions.

4. Using the Calculator

Tips: Enter the home price, down payment amount, interest rate, loan term, and comparable monthly rent. The calculator will show monthly and total costs for both options.

5. Frequently Asked Questions (FAQ)

Q1: What costs are included in the mortgage calculation?
A: This includes principal and interest payments plus the down payment. It doesn't include taxes, insurance, or maintenance.

Q2: How accurate is the rental comparison?
A: It assumes rent remains constant, which may not reflect reality. Consider potential rent increases in your decision.

Q3: Should I include property taxes and insurance?
A: For a complete comparison, you should add these costs separately to the mortgage results.

Q4: What's a typical down payment percentage?
A: Traditionally 20%, but many loans allow as little as 3-5% down (with PMI requirements).

Q5: How does home appreciation factor in?
A: This calculator shows costs only. Home appreciation would affect net ownership costs but is speculative.