Housing
Glossary
Every term used in this calculator, defined plainly.
- Opportunity Cost
- What your down payment could earn if invested in the stock market instead of used to buy a home. The calculator credits this to renting because a renter can invest the equivalent amount.→ Used in the calculator: The "Investment return on down payment" field
- Home Appreciation
- The annual rate at which home values increase. US historical average is roughly 3-4%, but varies enormously by market and period.→ Used in the calculator: The "Annual home appreciation" field
- Price-to-Rent Ratio
- Home price divided by annual rent for a comparable property. Below 15: buying favors. 15-20: depends on situation. Above 20: renting often wins. Above 30: strong renting signal in most scenarios.
- Property Tax Rate
- Annual tax assessed on the home's value, set by local government. US average is roughly 1.1% but ranges from 0.3% (Hawaii) to 2.4% (New Jersey).→ Used in the calculator: The "Annual property tax rate" field
- Maintenance Rate
- Annual cost of maintaining a home as a percentage of its value. Industry rule of thumb: 1-2% per year.→ Used in the calculator: The "Annual maintenance" field
- PMI (Private Mortgage Insurance)
- Insurance required on conventional loans when the down payment is less than 20% of the home price. Typically 0.5-1.5% of the loan amount annually. Not modeled in the calculator — add it manually for down payments under 20%.
- Break-Even Horizon
- The number of years you need to stay in a home before buying becomes cheaper than renting, after accounting for transaction costs and opportunity cost.
Ready to calculate?
Put these terms to work in the calculator.