The model compares the net value generated by buying a home vs. renting one, until mortgage pay-off, assuming availability of the same initial sum of money. Target home price assumed as starting sum for the “Rent” scenario and target home price less down-payment assumed for the “Buy” scenario.

The procedure requires:

• selecting a target home price and a target rent price for properties of comparable size and location (or same property);
• replacing default numbers with data tailored to your personal situation, for more accurate results.

More specifically, data to be entered include, for the “Buy” scenario:

• Target Home Price
• Buying Closing Costs (% of home cost)
• Annual Property Tax, Home Insurance, Maintenance (% of home value)
• Annual Property Appreciation %
• Down-payment %
• Mortgage Rate (fixed/variable)
• Term
• Selling Closing Costs (sale assumed at the end of mortgage term at the estimated appreciated value)

And for the “Rent” scenario:

• Target Monthly Rent
• Security Deposit
• Renter’s Insurance (% of annual rent)
• Annual Rent Appreciation %

Based on the above, the model calculates mortgage repayment schedule and value generated during the time horizon for the 2 scenarios, taking into account all costs plus return on the invested liquidity.