Wednesday, November 26, 2014

Price-to-Rent Ratio

A mathematical calculation that compares the totals costs of home ownership with the total cost of renting a similar property. The total costs of homeownership considered by the ratio include:

Mortgage principal and interest 

Property taxes 


Closing costs 

HOA dues where appropriate 

Mortgage insurance where appropriate
Tax advantages for owning (such as the mortgage interest deduction) and the total costs of renting, including the actual rent and renter's insurance, are also considered in the total cost of renting. 

(via Investopedia)