Introduction — what this calculator is, and isn't

Tenure runs a deterministic 30-year cost simulation comparing two paths for a US household making a housing decision: renting versus buying a specific home in a specific city. It outputs a single-word verdict (Buy, Rent, or Too close to call), the year buying overtakes renting in cumulative cost (the break-even year), and a year-by-year ledger of the underlying cash flows so the math is auditable.

What the calculator does

For every input you supply, we compute three parallel paths:

1. The buyer's cash outflow — down payment plus closing costs in year 1; then mortgage P&I, property tax (on the appreciated assessed value), homeowners insurance, maintenance reserve at 1% of home value, HOA fees if any, and PMI until 78% LTV — minus the federal tax benefit of itemizing if applicable.
2. The renter's cash outflow — current monthly rent grown at the assumed annual rate, summed over the horizon.
3. The renter's investment path — the down payment and closing costs, plus the monthly differential (buyer cost minus renter cost) when buying is the more expensive option, compounded monthly at the user-supplied investment return.

We then compare the net cost of buying (cumulative outflow minus tradable home equity at year N) against the net cost of renting (cumulative rent minus invested surplus at year N). The break-even year is the first year where the buyer's net cost falls below the renter's. The verdict bucket is determined by where that year sits relative to your stated stay length (within 2 years = too close to call; ≥ 2 years before stay-end = buy; ≥ 2 years after = rent).

What the calculator does not do

• It is not investment advice. The simulation describes a model, not a recommendation. We do not know what the housing market in your city will do over the next decade — no one does — so the numbers we surface are projections from your inputs and historical data, not guarantees.
• It does not account for the non-financial value of homeownership (control over modifications, school-district stability, the psychological comfort of a fixed payment) or of renting (mobility, optionality, no maintenance liability). These are real and they matter; they're just outside the scope of the cash math.
• It does not handle non-traditional purchases — cash deals, owner-financing, ARM resets after introductory periods, assumable mortgages — though all of these are on the v2 list.
• It does not consider state income tax explicitly. Where state income tax materially changes the calculus (no-income-tax states like Texas, Florida, Washington, Nevada), we surface it in city-specific commentary rather than baking it into the federal-only tax engine.

Who this is for

This calculator is most useful when you're trying to decide between a specific home in a specific city for a specific household — not when you're stress-testing a national policy thought experiment. It's calibrated for the median US household making the most common rent-vs-buy decision: somewhere between $300K and $1.5M home value, somewhere between 5% and 25% down, somewhere between 3 and 15 years of expected stay.

The math degrades at the extremes (true cash buyers, ultra-luxury homes, extremely short holding periods, retirement accounts paying for housing). For those edge cases, the calculator will still run — but the verdict label is less informative than the year-by-year ledger.

Mortgage math

We use standard monthly-compounding amortization, the same formula every US lender uses to compute a fixed monthly payment.

Fixed-payment formula

Given loan principal P, monthly interest rate r (annual rate ÷ 12), and term in months n, the monthly principal-and-interest payment is:

M = P × r / (1 − (1 + r)^−n)

For a $400,000 loan at 6.75% annual interest over 30 years (n = 360, r = 0.005625), this works out to $2,594.39/month — within $1 of every published mortgage calculator we've checked.

Each month's payment is split into interest (current balance × r) and principal (whatever's left over). The balance falls slowly at first (the interest-loaded portion of the schedule) and accelerates in later years.

PMI removal at 78% LTV

When the down payment is below 20%, lenders require private mortgage insurance. We model PMI at 0.5% of the original loan annually, charged monthly, and remove it the month the principal balance reaches 78% of the original home price — the threshold mandated by the Homeowners Protection Act of 1998.

This is a conservative assumption: many lenders charge between 0.3% and 1.0% depending on credit score and loan-to-value ratio. We picked 0.5% because it's near the median for buyers with credit scores in the 720–780 range, which is the most common buyer profile. Override it via the insurance field if you want a more aggressive or pessimistic PMI assumption.

Property tax

We apply the user-supplied effective property tax rate (or the city default, sourced from the Tax Foundation's annual report) to the appreciated assessed value each year. For most states this is functionally the same as market value × tax rate.

California is the exception. Proposition 13 caps annual assessed-value growth at 2%, regardless of market appreciation, until the home is sold. The default property tax rate for California cities (0.0073) reflects the statewide average effective rate post-Prop-13 — which is much lower than the nominal 1% rate would suggest because long-tenure owners are paying tax on a heavily-discounted basis. If you're a new California buyer, your effective rate in years 1–3 will be closer to 1.0%.

Closing and selling costs

• Closing costs default to 2.5% of the home price in year 1. This covers loan origination, title, escrow, recording, and prepaid items. Range observed in NerdWallet's 2024 closing-costs survey: 2–5% of price; we use the lower end because we want the model to be conservative against buying, not the other way around.
• Selling costs default to 6% of the appreciated home price at sale. This is the conventional combined buy-side and sell-side agent commission plus transfer tax buffer. The selling cost only matters for the 30-year net-worth calc — not for the cumulative-cost line.

Mortgage points and buy-downs

We do not currently model points or temporary buy-downs. If you're considering a 2-1 buy-down or paying points to lower the rate, run the calculator twice: once with the unbought-down rate, once with the post-buy-down rate. Compare the year-by-year ledgers; the break-even year on the cost of points itself is usually 4–6 years.

Tax treatment

US federal tax treatment is the single most underappreciated lever in the rent-vs-buy decision — and the lever most calculators get wrong by either ignoring it (the renter wins by default) or assuming everyone itemizes (the buyer wins by default). We model the actual mechanics.

Standard vs itemized deduction

The federal tax benefit of homeownership only exists to the extent that itemized deductions exceed the standard deduction. Our 2026 standard deduction values come from IRS Rev. Proc. 2025 inflation adjustments:

Filing status	2026 standard deduction
Single	$15,200
Married filing jointly (MFJ)	$30,400
Head of household	$22,800
Married filing separately	$15,200

If your mortgage interest plus capped property tax plus other itemizable expenses don't exceed your standard deduction, you get zero federal tax benefit from owning. This is the single most common reason calculators overstate the case for buying.

For an MFJ couple with a $400K mortgage at 6.75%, year-1 mortgage interest is roughly $26,800. Add a $10K capped SALT deduction. Total itemized: $36,800 — about $6,400 over the $30,400 standard deduction. At a 22% marginal rate, that's $1,408/yr in actual tax savings. Most online calculators will show $26,800 × 0.22 = $5,896 — over four times the real number.

SALT cap

The Tax Cuts and Jobs Act of 2017 capped the deduction for state and local taxes (SALT) at $10,000 combined. This includes property tax plus state income tax plus state sales tax. As of this writing, the cap is scheduled to remain in place through 2026 absent legislative action.

For high-property-tax states (NJ, IL, NY, NH), the SALT cap binds immediately on most homeowners. A $400K home in New Jersey at the state's 2.47% effective rate would generate $9,880 in property tax alone — pretty much the entire SALT cap. State income tax above that is non-deductible. We model this exactly: capped SALT goes into the itemization comparison; uncapped portions provide no federal benefit.

For low-property-tax states (HI, AL, CO, NV), the SALT cap rarely binds. The renter and buyer get similar treatment.

Capital-gains exclusion on sale

When you sell a primary residence you've owned and used for 2 of the last 5 years, IRC §121 lets you exclude:

• $250,000 of gain (single filer, head of household, MFS)
• $500,000 of gain (married filing jointly)

We apply this exclusion at the 30-year sale point in the net-worth calculation. Any gain above the exclusion is taxed at long-term capital gains rates. We approximate the LTCG rate at min(20%, marginal federal rate / 1.5) — a rough heuristic that errs slightly conservative against buying. (The actual brackets are 0%/15%/20% with state-specific surcharges; this will be refined in v2.)

For the median household at the median home price, the §121 exclusion swallows the entire 30-year gain. Capital-gains tax is only a meaningful line item for high-cost markets (San Francisco, Manhattan, parts of LA) where 30-year appreciation can plausibly exceed $500K.

What we deliberately don't model

• State income tax. State tax varies wildly (0% in TX/FL/WA, ~13% top rate in CA), and the SALT cap means most of it isn't federally deductible anyway. We surface state-tax effects in city commentary rather than the engine. If you're choosing between a no-income-tax state and a high-tax state, the calculator's output understates the case for the no-income-tax state by about 1–3 percentage points of effective wealth growth per year.
• Mortgage interest deduction limit. Mortgages above $750K (post-2017) have a partial-deduction limit. Our engine treats all interest as fully deductible up to the standard-deduction comparison; if you have a $1.5M mortgage, the calculator's tax benefit overstates by ~50%. Most users don't hit this.
• AMT (Alternative Minimum Tax). Post-TCJA, AMT affects roughly 0.1% of filers, almost entirely high-income with unusual deduction profiles. We do not model it.

Sources

• IRS Pub 936: Home Mortgage Interest Deduction
• IRS Pub 523: Selling Your Home
• IRS Rev. Proc. 2025: Inflation adjustments for 2026
• IRC §121: Exclusion of gain from sale of principal residence

Opportunity cost — the renter's missing line item

The single most-cited objection to "renting is throwing money away" is that buyers also pay a real (if invisible) cost: the opportunity cost on their down payment and closing costs. That cash, if invested in a balanced portfolio instead of locked into home equity, would compound. We model this explicitly.

The 7% default

Our default investment return is 7% nominal annualized for the renter's invested-surplus path. This is a deliberately middle-of-the-road number:

• The S&P 500 total-return index has compounded at roughly 10.0% nominal since 1928 (about 6.7% real after inflation).
• A 60/40 stock/bond portfolio has compounded at roughly 8.5% nominal over the same period.
• A 100% bond portfolio has compounded at roughly 5% nominal.

7% nominal corresponds roughly to the long-run return of a 70/30 portfolio after a small expense-ratio drag. Override it via the investment return slider on the calculator. If you're a renter with 100% of your investments in equities, use 9–10%. If you're holding a large cash buffer for the eventual home purchase, use 4–5%.

Why we use nominal, not real

The calculator works in nominal dollars throughout. The renter's investment return, the home-price appreciation, the rent growth, the mortgage interest — all nominal. This keeps the math internally consistent (you don't accidentally compare nominal mortgage rates to real returns) and matches how households actually budget.

The downside: $1,000,000 in year-30 dollars is worth less than $1,000,000 today. We surface this in the verdict reasoning ("in 2056 dollars") and in the city pages, but the engine itself doesn't deflate. If you want to interpret outputs in today's dollars, divide by (1 + inflation)^years — for our 3% default, that's a factor of 2.43 over 30 years.

Monthly compounding, contributions at month start

We compound monthly. Contributions (the buyer-renter monthly differential, when buy is more expensive) are added at the start of each month, then the entire balance compounds. This is the standard convention for most investment-return calculators and slightly favors the renter (vs end-of-month contributions), so we err on the side of running the renter case strongly when the math is close.

The Monte Carlo overlay

The calculator also offers an optional 1,000-path Monte Carlo simulation. For each path, we resample 12-month chunks of synthetic monthly return + inflation pairs, compute an annualized rate, and re-run the deterministic engine with that rate.

The synthetic dataset is currently a 1,176-month sample (98 years × 12) generated from a normal distribution calibrated to long-run S&P 500 + CPI moments. This is a v1 placeholder. The plan is to swap it for the actual Shiller monthly dataset (1928–2025) once we ingest that file. The marker for this swap is in lib/calculator/monte-carlo.ts.

The Monte Carlo overlay surfaces three numbers:

• P(buy wins) — the fraction of paths where break-even lands on or before your stay length
• P10/P50/P90 break-even — the 10th, 50th, and 90th percentile of break-even years across all paths

These are the answers to "given uncertainty about returns and inflation, what fraction of futures favor buying?" — not "what's the probability of returns being X." The distinction matters because the rent-vs-buy decision is fundamentally about path dependency, not endpoints.

Sources

• Robert Shiller, online data — long-run S&P 500 + CPI history
• Federal Reserve Economic Data (FRED), MORTGAGE30US — weekly 30-yr fixed mortgage rate
• Aswath Damodaran, NYU Stern, historical returns dataset

Data sources and refresh cadence

Every numeric default in Tenure traces back to a public, cited source. Below is the full list, with refresh cadence and last-pulled date.

Median home price (per metro)

• Source: Zillow Research, Home Value Index (ZHVI) — All Homes (Single-Family + Condo), Time Series, Smoothed Seasonally Adjusted, Tier 0.33 to 0.67 (the broad middle of the market).
• File: Metro_zhvi_uc_sfrcondo_tier_0.33_0.67_sm_sa_month.csv
• Refresh: Monthly, on the third Thursday.
• Method: We take the latest available month's value as the "median home price" for each metro, and compute a 5-year compound annual growth rate using the value 60 months prior.
• Coverage: ~900 US metros. Tenure surfaces the top 200 by population.

Median rent (per metro)

• Source: Zillow Research, Observed Rent Index (ZORI) — Single-Family + Condo + Multifamily, Smoothed.
• File: Metro_zori_uc_sfrcondomfr_sm_month.csv
• Refresh: Monthly, alongside ZHVI.
• Method: Latest available month's value, plus 5-year rent CAGR. Capped at +15%/yr / −10%/yr to filter outlier metros with thin sample sizes.

Effective property tax rate (per state)

• Source: Tax Foundation, "Property Taxes by State and County," April 2024 release.
• Refresh: Annual, after the IRS releases the prior year's owner-occupied housing values.
• Method: Tax Foundation publishes effective property tax rate (median property tax paid divided by median owner-occupied home value) for all 50 states + DC, computed from Census ACS data. We snapshot all 51 entries.
• Caveat: State-level rates mask substantial intra-state variation. Cook County, IL is materially higher than downstate Illinois; Westchester, NY is materially higher than upstate. The state rate is the right input for first-pass modeling but real users should verify their specific jurisdiction.

Average homeowners insurance premium (per state)

• Source: National Association of Insurance Commissioners (NAIC), "Dwelling Fire, Homeowners Owner-Occupied, and Homeowners Tenant and Condominium/Cooperative Unit Owner's Insurance Report," 2023 release.
• Refresh: Annual, with a ~24-month lag (2023 release covered 2021 data).
• Method: State-average annual premium, inflated ~10% to 2026 dollars to reflect the 2022–2025 hard insurance market.
• Caveat: Florida and Louisiana premiums in particular have moved significantly since the 2021 NAIC snapshot. We use the 2026-adjusted figure as a default, but on FL/LA city pages we surface this caveat in the local commentary.

30-year fixed mortgage rate

• Source: Federal Reserve Economic Data (FRED), MORTGAGE30US.
• Refresh: Weekly, on Thursdays at noon ET.
• Method: We pull the latest weekly value via the FRED API. If the API key is unavailable, we fall back to a 6.75% baseline anchored to the late-April 2026 weekly observation.
• Caveat: This is the advertised rate for prime borrowers (740+ FICO, 80% LTV, primary residence, 30-day lock). Your actual rate will vary by ±0.25%–0.50% depending on lender, credit, and loan size.

Population and income

• Source: US Census Bureau, American Community Survey 5-Year Estimates, tables B01003 (population) and B19013 (median household income).
• Refresh: Annual, in December.
• Method: Snapshot of metro-level data joined to the ZHVI/ZORI metros by FIPS code.

Climate region (per state)

• Source: Internal taxonomy, derived from National Weather Service climate divisions and Köppen classification.
• Refresh: Static (climate doesn't move that fast).
• Use: Drives city-page commentary about insurance exposure and seasonal cost variance.

Why we don't use Redfin or Realtor.com

Redfin and Realtor.com publish their own home-price indices (RDFN HPI, Realtor median listing price). We chose Zillow because (1) ZHVI methodology is the most thoroughly documented and peer-reviewed; (2) Zillow's free public CSVs are the most ingest-friendly; (3) we'd rather have one consistent source than blend three with different methodologies and risk introducing bias from the blend. Redfin and Realtor are excellent and we'd encourage cross-referencing them when you're making a real decision.

Refresh schedule on this site

• ZHVI / ZORI: pulled every Sunday at 03:00 UTC via Vercel Cron.
• Tax Foundation rates: refreshed annually in May after their next release.
• NAIC insurance: refreshed annually in Q1 after their next release.
• FRED mortgage rate: refreshed every Sunday alongside ZHVI/ZORI.
• Top-200 city-overrides MDX: reviewed annually.