Data Glossary

The total purchase price of the home, used as the basis for calculating loan amount, property taxes, insurance estimates, and appreciation projections.

The amount paid upfront toward the home purchase. Reduces the loan amount dollar-for-dollar. Expressed as a dollar amount or percentage of home price.

Note: Down payments below 20% of the home price typically require PMI.

The portion of the home price financed through the mortgage after subtracting the down payment.

Loan Amount = Home Price − Down Payment

Example: For a $500,000 home with a $100,000 (20%) down payment: Loan Amount = $500,000 − $100,000 = $400,000.

The annual interest rate on the mortgage, entered as a percentage. Used in the standard amortization formula to calculate monthly principal and interest.

The number of years over which the loan is repaid.

Default: 30 years

The fixed monthly mortgage payment covering principal repayment and interest charges. Does not include taxes, insurance, or HOA.

M = P × [r(1+r)^n] / [(1+r)^n − 1]

where:
  P = loan amount
  r = monthly interest rate (annual rate ÷ 12)
  n = total number of payments (loan term in years × 12)

Example: For a $400,000 loan at 6.5% for 30 years: r = 0.065 ÷ 12 ≈ 0.00542, n = 360. M ≈ $2,528/month.

Annual property tax expressed as a percentage of home value, divided by 12 for the monthly cost. True Cost auto-populates this from county-level Census data when a ZIP code is entered.

Assumption: Rate held constant over the projection period. Tax liability is adjusted each year according to the home appreciation rate on the buy vs rent tab. If your state has an assessment or liability cap on property tax increases, the calculator will not increase your annual property tax estimate by more than the cap allows.

Example: A 1.2% effective rate on a $400,000 home: $4,800/year, or $400/month.

Monthly premium for homeowner's insurance.

Assumption: When a state is known, True Cost estimates this using state-level average premium data interpolated by home value. The estimate assumes dwelling coverage = 75% of home value. Users can override this value at any time.

Monthly homeowners association fees, if applicable. These are treated as a fixed recurring cost and optionally inflated annually at the HOA inflation rate.

Default: $0

Required when the down payment is less than 20% of the home price. Protects the lender in case of default.

Assumption: PMI is removed automatically in the model once the loan-to-value ratio reaches 80% (equity = 20%).

Default: 0.5% of loan amount annually (÷ 12 for monthly cost)

Example: On a $400,000 loan: 0.005 × $400,000 ÷ 12 ≈ $167/month.

Annual rate at which HOA fees and insurance premiums are assumed to increase over time.

Default: 3%

The percentage of the home's value that is financed. LTV above 80% triggers PMI.

LTV = Loan Amount / Home Price × 100

Example: $360,000 loan on a $450,000 home: LTV = 360,000 ÷ 450,000 × 100 = 80%. PMI not required at exactly 80%.

The total monthly housing payment including all four components: principal, interest, property taxes, and homeowner's insurance. The standard measure of monthly housing cost used in affordability assessments.

The percentage of gross monthly income consumed by housing costs. Lenders typically require front-end DTI below 28% and total DTI (including all debts) below 36–43%.

Front-end DTI = Monthly PITI ÷ Gross Monthly Income × 100

• • ≤ 28% — Within recommended limits
• • 28–36% — This may be a stretch
• • > 36% — Above recommended limits

Example: Monthly PITI of $2,800 on a $10,000/month gross income: DTI = 28%.

Estimated annual cost of routine upkeep, repairs, and replacements. Can be entered as a percentage of home value or a fixed annual dollar amount.

Assumption: A widely cited rule of thumb. Actual costs vary significantly by age and condition of the home. Future maintenance cost estimates are increased annually according to the inflation rate entered in tab 1.

Default: 1% of home value per year

Example: On a $400,000 home: 1% = $4,000/year, or ~$333/month.

The assumed annual rate at which the home's market value increases over time. Used in equity projections and buy vs rent comparisons. We provide an estimated historical rate of home price appreciation for your zip code. Past appreciation rates may not always be useful in predicting future returns.

Assumption: Historical U.S. average appreciation has been approximately 3–4% annually, though this varies significantly by market and time period.

Default: 3%

Current monthly rent payment used as the baseline rental cost in the buy vs rent comparison.

The assumed annual rate at which rent increases over the projection period.

Default: 3%

Monthly cost of renter's insurance, included in the total cost-to-rent calculation.

Default: $15/month

The assumed annual return on the down payment if it were invested in the market rather than used to purchase a home. This represents the opportunity cost of homeownership.

Assumption: Approximates long-run average real equity market returns based on historical S&P 500 performance.

Default: 7%

The foregone investment growth on the down payment amount. Used in the buy vs rent net worth comparison to fairly account for the alternative use of capital.

FV = Down Payment × (1 + r)^n

where:
  r = annual investment return rate
  n = years

Example: $100,000 down payment invested at 7% for 10 years: FV = $100,000 × (1.07)^10 ≈ $196,715.

The difference in net worth between buying and renting at a given point in time. Accounts for equity accumulated, opportunity cost of the down payment, total payments made, maintenance costs, tax benefits (if enabled), and closing costs.

Note: Positive value = buying results in higher net worth. Negative value = renting and investing results in higher net worth.

The year at which buying a home produces a higher cumulative net worth than renting and investing. Before this point, renting is financially superior; after it, buying is.

One-time transaction costs paid at purchase, including origination fees, title insurance, escrow, and recording fees. These are factored into the buy vs rent comparison as an upfront cost of buying.

Default: 3% of home price

Example: On a $400,000 home: 3% = $12,000 in estimated closing costs.

Annual pre-tax household income. Used to determine the applicable federal and state marginal tax brackets and to calculate the value of itemized deductions.

Federal (and state) tax filing category. Affects standard deduction amounts and tax bracket thresholds.

The fixed deduction amount set by the IRS that taxpayers may claim instead of itemizing. If the standard deduction exceeds itemized deductions, itemizing provides no tax benefit.

Assumption: 2025 values: Single $15,000 | Married Filing Jointly $30,000 | Head of Household $22,500 | Married Filing Separately $15,000.

Federal (and in some states, state) tax deduction for mortgage interest paid. Only beneficial when total itemized deductions exceed the standard deduction.

Annual Tax Savings = Annual Interest Paid × Marginal Federal Tax Rate

(Annual interest paid is derived from the amortization schedule.)

Note: The deduction phases out as the loan pays down and interest comprises a smaller share of each payment.

Example: $18,000 in annual mortgage interest × 22% marginal rate = $3,960 in annual federal tax savings.

Federal deduction for state income taxes and property taxes paid.

Assumption: Capped at $10,000 per year under current tax law (Tax Cuts and Jobs Act, extended through 2025).

The net annual reduction in federal (and state) income tax resulting from mortgage interest and SALT deductions, only in years where itemizing exceeds the standard deduction. Expressed in annual dollar savings.

The tax rate applied to the last dollar of income earned. This is the rate used to calculate the value of deductions — a higher bracket means each deductible dollar is worth more.

Example: A $1,000 deduction saves $220 for someone in the 22% marginal tax bracket, but $320 for someone in the 32% bracket.

Upfront fees paid to the lender at closing in exchange for a lower interest rate. One point equals 1% of the loan amount.

Example: 1 point on a $400,000 loan = $4,000 upfront cost to the borrower.

The interest rate reduction achieved by purchasing one mortgage point. This varies by lender and market conditions.

Assumption: Industry rule of thumb. Verify the actual reduction with your lender before closing.

Default: 0.25% per point

The number of months required for the monthly interest savings from buying points to offset the upfront cost of the points.

Break-even Months = Points Cost ÷ Monthly Savings

Example: $4,000 in points with $80/month in interest savings: Break-even = 4,000 ÷ 80 = 50 months (~4.2 years).

A more conservative break-even calculation that accounts for the investment return that could have been earned on the points cost if invested instead of paid upfront.

Assumption: Typically results in a break-even 12–36 months longer than the simple break-even, depending on the assumed investment return rate.

How long the user expects to own the home on the current mortgage. Used to determine whether buying points is financially worthwhile — if the break-even exceeds the holding period, points are not recommended.

Default: 7 years

The current outstanding principal on the existing mortgage. Can be entered directly or auto-calculated from the original loan details and number of months paid.

The number of months required for monthly payment savings to offset the closing costs of refinancing.

Break-even Months = Total Closing Costs ÷ Monthly Payment Savings

Note: When refinancing to a shorter term results in a higher payment, break-even is instead calculated on total interest saved over the remaining life of the loan.

Example: $6,000 in closing costs with $200/month in payment savings: Break-even = 6,000 ÷ 200 = 30 months (2.5 years).

An optional amount of home equity withdrawn at refinance by increasing the new loan balance above the remaining principal. Increases the new loan amount and monthly payment.

Instead of paying refinance closing costs upfront, the costs are added to the new loan balance. This reduces the upfront cash needed but increases the loan amount, monthly payment, and total interest paid over the life of the loan.

The difference between the total remaining interest on the current loan and the total interest that would be paid on the new loan (excluding closing costs). A positive number indicates the refinance saves money over the life of the loan.

The process of paying off a loan through regular scheduled payments. Early payments are predominantly interest; over time, a greater share goes toward principal as the balance declines.

The portion of the home's value owned outright by the homeowner. Grows over time through principal paydown and home price appreciation.

Equity = Current Home Value − Remaining Loan Balance

Example: Home worth $450,000 with a $320,000 remaining balance: Equity = $130,000.

The true monthly cost of homeownership after accounting for equity buildup and tax benefits. A more apples-to-apples comparison against a monthly rent payment.

Effective Monthly Cost = PITI + Maintenance − Monthly Equity Gain − Monthly Tax Benefit

A mortgage with an interest rate that remains constant for the entire loan term. Monthly P&I payments never change, providing payment certainty over the life of the loan.

A mortgage with an interest rate that is fixed for an initial period (e.g., 5 years for a 5/1 ARM), then adjusts annually based on a market index, subject to periodic and lifetime rate caps.

A key metric used by lenders to assess risk. LTV above 80% typically requires PMI. Refinancing below 80% LTV can eliminate PMI.

LTV = Remaining Balance ÷ Current Home Value × 100

Example: $280,000 remaining balance on a home worth $400,000: LTV = 70%. PMI not required.