Initial costs are the costs you incur when you go to the closing for the home you are purchasing. This includes the down payment and other fees.
Recurring costs These include mortgage payments, condo fees (or other community living fees), maintenance and renovation costs, property taxes and homeowner’s insurance. Property taxes, the interest part of the mortgage payment and, in some cases, a portion of the common charges are tax deductible. The resulting tax savings is accounted for in each item’s totals. The mortgage payment amount increases each year for the term of the loan because the tax credit shrinks each year as the interest portion of the payments becomes smaller.
Net proceeds is the amount of money you receive from the sale of your home minus the closing costs, which includes the broker’s commission and other fees, the remaining principal balance that you pay to your mortgage bank and any tax you have to pay on profit that exceeds your capital gains exclusion. If your total is negative, it means you have done very well: You made enough of a profit that it covered not only the cost of your home, but also all of your recurring expenses.
Initial costs include the rent security deposit and, if applicable, the broker’s fee.
Recurring costs include the monthly rent and the cost of renter’s insurance.
Opportunity costs are calculated each year for both your initial costs and your recurring costs.
Net proceeds include the return of the rental security deposit, which typically occurs at the end of a lease.
Consumer Information, Tips & Resources
Renting vs. Owning a Home: What's the Difference?(link is external) (Investopedia, Jul. 30, 2022)
Choosing to rent or buy your home is a major decision that affects not only your lifestyle but also your financial health.
Rental Help in Your State(link is external) (HUD)
In addition to the federal rental assistance, homeownership and home buying assistance programs, there may be programs sponsored by your state or local government or other organizations that can help you.
Rent vs. Buy(link is external) (My Home by Freddie Mac)
If one day you aspire to be a homeowner, keep your long-term goals in mind. The transition from renting to buying is a big step which requires patience and lots of planning.
First-Time Home Buyer Resources(link is external) (realtor.com®)