What is being subtracted
The rent side is simple. Monthly rent, held flat unless you type a yearly increase, times twelve, times the years you would stay. A $2,000.00 rent for five years with no increase is $120,000.00. The owning side starts with the down payment and any closing costs you type. It adds every principal-and-interest payment during the stay, taken from the same schedule as the mortgage calculator. It adds property tax, insurance, and maintenance for each year you type. It does not add them if you leave the fields at zero.
Equity is the ending value minus the loan balance at the end of the stay. Ending value is the price grown by the yearly appreciation rate you type. At zero, the price does not change. Net owning cost is the cash paid minus that equity. The headline gap is rent paid minus net owning cost. On the form's opening example the gap is $27,112.33, the net owning cost is $92,887.67, and equity is $102,225.93. A positive gap means rent cost more cash than owning, after giving owning credit for equity. It does not mean buying is the better life. Selling costs, a move, and a loan you cannot get are all outside the subtraction.
A case with no rounding argument
Rent of $1,000.00 for one year is $12,000.00. A $12,000.00 home, nothing down, at a zero interest rate for one year, has a $1,000.00 principal payment. After twelve payments the balance is $0.00. The home is still worth the price, because appreciation is zero, so equity is $12,000.00. Cash in and equity out cancel, and the net cost of owning is $0.00. Rent costs $12,000.00 more than that net owning cost. The example is there so the subtraction can be checked with a pencil. It is not a claim that houses cost $12,000.00 or that loans are free.
The opening form is a different scale on purpose: a $400,000.00 price, $80,000.00 down, 6 percent, 30 years, a five-year stay, and every carrying cost at zero. Six percent is the checked example rate from the mortgage page, not a market quote. The principal-and-interest payment on that loan is $1,918.56. Because tax, insurance, maintenance, closing costs, and appreciation are zero, the comparison is mostly "rent versus payments and a down payment, with the remaining balance handed back as equity at the original price." Turn any of those zeros into a real bill and the net cost of owning rises. Turn appreciation up and equity rises. The inflation page is where a price path is the whole question. This page will not copy an inflation rate into the appreciation box for you.
What zero is hiding
Property tax is local. This site does not have a sourced rate for a house it cannot see, so the field starts empty of a guess. Insurance is a quote. Maintenance is a guess you are allowed to type and the page is not allowed to invent. A common internet rule of thumb about repairs as a percent of the price is not used here, because this page does not have a primary source that fixes that percent for every house. If you leave maintenance at zero, you are assuming the house does not cost money to keep. That assumption should be visible, which is why the field shows the zero instead of hiding a percent inside the code.
Appreciation is the same kind of field. The Federal Reserve describes inflation as a general increase in the overall price level, not as the change in one house. A home can rise while the price level does something else, or fall. The default of zero is not a prediction that prices will be flat. It is a refusal to predict. Rent increases default to zero for the same reason. A lease you have in hand is a better number than a rate this site would make up.
The loan is only principal and interest
The CFPB explains that the payment lenders calculate for a fixed-rate mortgage is the amount that, paid each month for the full term, brings the balance to zero. That payment is not the whole cost of the house. The affordability page is where a housing payment is divided by income, and the toolkit's 28 percent line is a rule of thumb rather than a law. The PMI page is where a down payment under 20 percent of price is flagged, because the CFPB says private mortgage insurance may be required on a conventional loan in that case. This comparison does not add a PMI premium unless you put it in maintenance or in a yearly amount you type. There is no silent premium.
The stay cannot be longer than the term, and both are whole years. If you would sell in year five of a thirty-year note, the balance is not zero. Equity is price, adjusted only by the appreciation you typed, minus that balance. If the balance is larger than the value, equity is negative and the net cost of owning is higher. The page will show that. It will not call it a reason to rent or a reason to buy. Giuseppe Ilarda, the site owner, writes and checks the arithmetic. The disclaimer is the boundary: educational estimates, not advice about a house.
Reading the gap
Use the gap as a cash comparison under the assumptions on the form. If you change the stay, both sides change, because rent stops when you leave and so do the owner bills, while the loan balance is whatever the schedule says in that month. If you raise the rate, the payment rises and the balance at a given month is higher, so equity is lower. If you add closing costs, they are cash on the owning side that does not become equity. None of those moves is a recommendation. They are the levers. A decision about a particular house still depends on the lease, the loan estimate, the tax bill, and whether you want to own the repair. This page has the first two only to the extent you type them.