Explainations for Rent or Buy Calculator

Funds available for real estate and/or investment:
Includes all investible cash, including cash already invested in mutual funds, GICs, other real estate, etc.

Disposable monthly income available for housing or investing:
This amount represents monthly income available for housing and investing. To determine, deduct all non-housing or investing cash flows from gross monthly income. Hence, income taxes, food expenses, car expenses, and all other non-housing or investing expenses are deducted from net income.

Estimate of the long-term inflation rate:
Specify your estimate of annual inflation. Over the last few years, inflation has ranged around 2%.

Estimate of after-tax return on portfolio investments:
The after-tax return you expect to earn on investments, such as GICs, mutual fund investments, and other investments. Expressed as a percentage.

Annual equivalent (APR) mortgage rate:
The mortgage rate is the rate of interest paid on the mortgage loan. Expressed as a percentage.

Down payment:
The down payment is the amount of cash invested in the house. The difference between the value of the property and the down payment is the principal.

Months until maturity, amortization period (max 360):
The number of months between now and the date that the principal is completely repaid. Input a positive whole number less than or equal to 360.

Monthly expenses for purchased residence:
Monthly expenses include maintenance, property taxes, property insurance, etc.

Expected (after-tax) return on real estate:
The rate at which you expect the value of the residence to grow, annually. Note that any growth in value of your principal residence will be tax exempt.

Market value of the purchased residence:
Specify the amount paid for the purchased residence.

Monthly expenses associated with the rental:
May include maintenance costs, tenant's insurance, etc...


Total Wealth, Real Dollars

Definition of total wealth:

  • If house purchase chosen: The value of the house plus portfolio investments, minus the outstanding principal at the end of the period.
  • If rental chosen: The value of portfolio investments at the end of the period.

Disposable income not used for housing is assumed to be invested in the portfolio at the end of the year.


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