Methodology
Last updated: September 2026
This page describes what the app computes, so you can judge whether the answer applies to you. It explains the model; it is not advice about your own situation.
The principle: equal budgets
Comparing a mortgage payment to rent quietly assumes the renter spends the difference. Assume instead that they invest it and the answer often flips. To avoid deciding the outcome by assumption, the model gives both households the same budget every month:
- Each month, both pay their own housing costs.
- Whoever pays less invests the difference in a taxable brokerage account earning your assumed return.
- The same rule applies at closing: the buyer's down payment and closing costs are cash the renter invests instead.
Neither side is assumed to be more disciplined than the other. The only difference is where the money goes.
The measure: liquidated net worth
At any month, both households are asked to cash out completely:
| Owner | Renter |
|---|---|
| Sale price, less cost of selling, less the remaining mortgage, less capital gains tax above the exclusion, plus their portfolio after capital gains tax. | Their portfolio after capital gains tax, plus the security deposit returned. |
Stating both on a liquidated basis is what makes the crossover point meaningful: it is the month at which owning starts leaving you better off and keeps doing so.
What the owner pays
| Item | How it's modeled |
|---|---|
| Principal & interest | Standard amortization at APR / 12, the US servicing convention. Optional extra principal shortens the term. |
| Property tax | Annual rate on the assessed value. Assessment either tracks market value or grows at a capped rate (California Prop 13, Florida Save Our Homes, and similar). |
| Insurance, HOA | Entered in today's dollars, grown with inflation. |
| Maintenance | A share of the current home value each year — so it rises as the home appreciates. |
| PMI | Charged on the balance while the loan-to-value ratio against the original price exceeds your threshold, then stops. |
| Closing costs | A share of price at purchase, plus discount points; a share of the sale price when selling. |
What the renter pays
Rent, stepped up once a year at lease renewal rather than drifting monthly, plus renter's insurance grown with inflation. The security deposit is returned at move-out, without interest.
The tax deduction, done properly
The common shortcut — mortgage interest times your tax rate — badly overstates the benefit, because most households would take the standard deduction anyway. What owning is actually worth is:
benefit = rate x [ max(itemized with the house, standard) - max(itemized without it, standard) ]
Property tax competes with your other state and local taxes for room under the SALT cap, and interest on balances above the principal cap is prorated. The standard deduction and SALT cap can be indexed to inflation over the horizon; the mortgage principal cap is not indexed, matching the statute.
Federal and state, separately
That test runs twice — once federally, once for your state — and the two answers are added. Adding the two rates together and running it once, which is what most calculators do, is wrong in both directions depending on where you live.
The reason is that states differ by far more than their rates. Nine tax no income at all. Ten more tax income but allow nothing for owning, so a mortgage is worth nothing on the state return. Five start from your federal taxable income, which carries the federal answer straight through. The rest run their own test against their own standard deduction — usually a much lower bar than the federal one, which is why the state side is often worth more than the rate difference suggests. Three are stranger still: New Jersey and Indiana deduct property tax and not mortgage interest, capped at $15,000 and $2,500; Kentucky does the reverse, allowing the interest and nothing for the tax.
Pick your state and the app reads the current brackets, the state's standard deduction, its rules on housing deductions and its treatment of capital gains. Every rate it produces can be overridden — which is what you should do if you pay a city or county income tax, because those are not included.
Solvers
- Break-even rent — the starting rent at which both paths end the horizon exactly even. Below it, renting wins; above it, buying.
- Appreciation needed — the annual home appreciation that would leave the two even, which is easier to sanity-check against a local market than a dollar figure.
What the model leaves out
- Everything that isn't money. Stability, freedom to move, control over your own home, the stress of a repair bill. These often matter more than the number, and no calculator can weigh them for you.
- Certainty. Returns and appreciation are assumptions, entered as smooth annual rates. Real markets are neither smooth nor predictable, and the order in which returns arrive matters.
- Rental income, refinancing, ARMs, and moving costs.
- Capital improvements, which would raise your cost basis and reduce tax on the eventual gain.
- Annual tax drag on the investment portfolio from dividends and turnover. Gains are taxed once, at liquidation.
- Alternative minimum tax, deduction phase-outs, and the net investment income tax.
- City and county income taxes — Maryland's counties, New York City, Ohio's municipalities and Pennsylvania's boroughs among them. Where you pay one, the state rate is too low and you should raise it yourself.
- State credits given instead of deductions, such as Illinois's property tax credit, and state head-of-household brackets, which most states do not publish.
Tax figures
The app ships with the 2026 federal brackets and the 2026 rate schedules for all fifty states and the District of Columbia, along with approximate defaults for the standard deduction, SALT cap, principal cap, and capital gains rates. These change from year to year — eight states cut their rates on 1 January 2026 alone. Every one of them is editable. Check them against your own situation and current IRS and state guidance.
Estimates only — not financial, investment, tax, or legal advice, and not a recommendation to buy or rent. You are responsible for your own decisions; see the terms of use.