Methodology & Sources

1. Mortgage & amortization

Monthly payment uses the standard fixed-rate amortization formula on (Home price − Down payment), the term, and the rate. Each month we split the payment into interest (balance × monthly rate) and principal, and carry the balance forward. See the CFPB on conventional loans.

2. Private Mortgage Insurance (PMI)

When the down payment is under 20%, PMI is charged as an annual percentage of the original loan and is added to the owner's monthly cost. Per the Homeowners Protection Act (12 U.S.C. §4902), we automatically remove PMI once the loan balance reaches 78% of the original home value. Ignoring PMI is the single most common way calculators understate the cost of buying with a low down payment.

3. The tax benefit — the honest part

A mortgage only saves you tax if your itemized deductions exceed the standard deduction. After the 2017 Tax Cuts and Jobs Act, the large majority of households take the standard deduction and get $0 marginal benefit from mortgage interest. We model this correctly:

• Deductible mortgage interest is limited to interest on the first $750,000 of acquisition debt (IRS Publication 936).
• State & local taxes (including property tax) are capped at $10,000 — the SALT cap (IRS Topic No. 503).
• The 2025 standard deduction is $15,000 (single) / $30,000 (married filing jointly) (IRS 2025 inflation adjustments).
• Annual benefit = max(itemized − standard deduction, 0) × your marginal rate, applied only if you choose "buyer itemizes."

4. Net worth: buy vs rent

Buy net worth = Home value × (1 − selling cost %) − Remaining mortgage − Closing costs. Rent net worth = the down payment and closing costs invested up front, plus the amount you save each period by renting instead of owning, invested at the alternative investment return. This compares wealth, not just monthly payments — the framing used by the NYT rent-or-buy model.

5. Real (inflation-adjusted) dollars

"$1.5M in 30 years" is not $1.5M of today's purchasing power. The "Show in today's dollars" toggle deflates every figure by your inflation assumption so the comparison is in real terms. Long-run inflation context: BLS Consumer Price Index.

6. Local (per-metro) starting estimates

City pages and the metro picker prefill realistic local values so you don't start from a blank form. These are starting estimates to overwrite, not appraisals:

• Effective property-tax rate — state-level effective rate (Tax Foundation / U.S. Census ACS). Property tax varies far more by state than by metro and is the most decision-relevant local input.
• Homeowners insurance — state average annual premium (NAIC / industry aggregates); dominated by state-level wind/fire risk.
• Median home price & typical rent — metro-level, public Census / listing aggregates, rounded.
• Appreciation — a single conservative national assumption. We do not forecast per-metro appreciation; stress-test it with the sensitivity readout.

7. Limitations

• Fixed-rate loans only; ARMs and interest-only are not modeled.
• We don't model tax brackets changing over time, AMT, or phase-outs.
• Appreciation, rent growth, and investment returns are assumptions, not forecasts. Use the sensitivity readout and stress-test a range.
• Local property tax, insurance, and maintenance vary widely — set them to your market.