Methodology

Default inputs and their sources

Every value in the table below is the pre-filled default the calculator loads on first visit. Each is editable — override any of them in the form and the answer updates live. The "source" column is the same citation you see in the tooltip beside each field.

Property tax on the metro pages

The calculator's default property-tax rate is a national average, shown in the table above and editable like everything else. Our per-metro pages replace it with a local figure, and there is one rule for how that figure is computed:

The effective property-tax rate is computed on a new buyer's assessed basis — published millage or levy rates applied to that page's purchase price, net of the homestead relief a new owner-occupier can claim — and never on an owner-average ratio such as median taxes paid divided by median home value.

The owner-average shortcut is tempting because the Census Bureau publishes both halves of it for every metro. It measures the wrong taxpayer wherever assessment is capped for incumbents and reset on sale: Florida's Save Our Homes cap and Texas's 10% homestead cap both make a long-tenured owner's bill a poor guide to a buyer's. It also drifts even where nothing is capped, because the survey window averages several years of levy rates and pairs them with a metro-wide, all-homes median value rather than the single-family price the page is actually pricing.

So every metro page derives its rate, names the levying bodies, shows the arithmetic and the resulting annual dollar figure, and prints the Census ratio beside it as a contrast — including where the two agree. "We checked and it reconciles" and "we never checked" must not look the same on a page.

Transaction-friction by jurisdiction

Buying and selling a home carries one-off cash costs that a rent-vs-buy model has to bake in — otherwise the owner-side answer is silently optimistic. The calculator ships with four jurisdictions today; each specifies the three levers below. Pick a different jurisdiction in the "Assumptions" panel to switch the whole set at once.

Formulas

Mortgage payment

Standard fixed-rate amortization:

M = P × i(1+i)^n / ((1+i)^n − 1)

• M — fixed monthly principal-and-interest payment.
• P — loan principal = home price − down payment.
• i — monthly interest rate = annual rate / 12.
• n — total monthly payments = term (years) × 12.

Interest is computed on the remaining balance each month and rounded to the cent; principal is the remainder; the final month absorbs any rounding drift so the balance closes to exactly $0.00.

Opportunity-cost portfolio

Both renter and buyer start with identical wealth — the down payment plus buy-side transaction costs. The buyer spends it acquiring the home; the renter invests it at the discount rate. Each month, whoever has the cheaper housing bill deposits the difference into their own investment portfolio; both portfolios compound at the same discount rate. This keeps the comparison symmetric and prevents the model from silently discarding the buyer's late-horizon cash advantage.

portfolio(t) = portfolio(t-1) × (1 + r/12) + deposit(t)

Home value and equity

home_value(t) = home_price × (1 + g/12)^t
loan_balance(t) = from amortization schedule
equity(t) = home_value(t) − loan_balance(t)

Transaction friction

buy_cost = closing_costs(price) + transfer_tax(price)
sell_cost(t) = commission × home_value(t)

sell_cost is applied hypothetically at every month, not only at the horizon — the "what if I sold today" framing is the honest one because it shows how long buying takes to overcome its own upfront friction. Toggle "I plan to hold indefinitely" in the assumptions panel to remove sell_cost entirely (forever-home framing).

Net worth

rent_nw(t) = renter_portfolio(t)
own_nw(t)  = equity(t) − sell_cost(t) + owner_portfolio(t)

Break-even year

The smallest year boundary Y at which own_nw(Y) ≥ rent_nw(Y). Returns nothing when owning never overtakes renting inside the chosen horizon — the results view says so explicitly and does not invent a fake break-even year.

Worked example — the default US scenario

Plug the defaults from the table above into the mortgage formula and you get the same monthly payment the calculator shows. Reproducing this on the back of an envelope should take under a minute; if it doesn't match what you see in the results view, either the calculator has a bug or this page is out of date. Either way, tell us.

• Home price P_home = $420,000
• Down payment = 20% = $84,000
• Loan principal P = $336,000
• Nominal annual rate = 6.5% → monthly i = 0.541667%
• Term = 30 years → n = 360 months
• M = $336,000 × 0.005417(1+0.005417)³⁶⁰ / ((1+0.005417)³⁶⁰ − 1) ≈ $2,124/mo

The break-even engine wraps this into the full month-by-month cashflow comparison described above. The complete source lives at src/math/breakEven.ts, src/math/mortgage.ts, src/math/portfolio.ts, and src/math/transactions.ts — each function is pure, deterministic, and covered by unit tests including a golden-number regression on this default scenario.

Versioning

Any change to a default value or a formula is a code change with a user-visible commit message — never silent. This page is generated from the same constants the calculator loads at runtime, so if the calculator updates, this page updates with it. There is no separate "content source" to drift out of sync.

Suggested change to a default or a source? Open an issue or a pull request against the repository. We ship the calculator, but we do not own the truth — the citations do.

Where each assumption is explained at length

Each entry below argues one line of this page in full — where the number comes from, how wrong it can plausibly be, and what happens to the break-even year when you move it.

• Break-even year, plain English — what the crossing point in the "Break-even year" formula above actually means.
• Opportunity cost: investing your down payment instead — the reasoning behind the symmetric portfolio model.
• What investment return should you assume? — how we picked the default discount rate, and why it matters more than the mortgage rate.
• Closing costs, explained and closing costs by state — the buy-side transaction friction in the jurisdiction table.
• Is the 1% maintenance rule real? — the source and the spread behind the maintenance reserve default.
• Property tax, insurance, HOA: your real monthly cost — the carrying costs stacked on top of principal and interest.
• PMI explained and 5% down vs 20% down — what changes when the down-payment default does not fit you.
• Rent-to-price ratio — a sanity check on the rent and home-price pair you entered.

The full library is at Learn. When you are ready to put your own numbers in, go back to the rent-vs-buy calculator — every default listed on this page is editable there, and the answer updates as you type.