Rent vs. Buy Calculator
Compare the true cost of renting versus buying a home. This calculator goes beyond the monthly payment - it factors in home appreciation, investment returns on your down payment, taxes, maintenance, and selling costs to show which path builds more wealth for your situation.
Your Situation
What you pay (or would pay) to rent a comparable home
National average is around 3% per year
If You Buy
Applies while equity is under 20%
% of home price
% of sale price
Annual growth in home value
The Comparison
The single biggest factor in the outcome
What your down payment could earn if invested instead
The Verdict
Cost Comparison
Year-by-Year Comparison
| Year | Buy: Net Worth | Rent: Net Worth | Winner |
|---|---|---|---|
| 1 | $72,737 | $107,562 | Renting +$34,825 |
| 2 | $90,174 | $123,792 | Renting +$33,618 |
| 3 | $108,343 | $140,726 | Renting +$32,383 |
| 4 | $127,278 | $158,404 | Renting +$31,126 |
| 5 | $147,015 | $176,865 | Renting +$29,850 |
| 6 | $167,591 | $196,153 | Renting +$28,562 |
| 7 | $189,045 | $216,315 | Renting +$27,270 |
Making the Comparison Fair
- • Compare rent for a home you'd actually buy - not your current smaller apartment
- • Be honest about the investment return: it only counts if you'd really invest the difference
- • The longer you stay, the more buying is favored - try different time horizons
- • Use your area's actual property tax rate; it varies enormously by county
- • If you might move within 3-4 years, look closely at the breakeven year
How This Calculator Compares Renting and Buying
An Apples-to-Apples Net Worth Race
Most rent-vs-buy comparisons just stack monthly rent against a mortgage payment. That misses the two things that actually decide the outcome: what the buyer's home equity grows into, and what the renter's down payment could have earned invested elsewhere.
This calculator gives both people the same starting cash - the down payment plus closing costs. The buyer puts it into the house; the renter invests it. Each month, whoever is paying less puts the difference into investments too. At the end of your time horizon, we compare net worth: the buyer's equity (after selling costs) plus any investments, versus the renter's portfolio.
Why the Breakeven Year Matters
Buying front-loads its costs. Closing costs, and later selling costs, eat roughly 8-9% of the home's value round-trip, and in the early years of a mortgage most of your payment goes to interest rather than equity. That's why buying almost always loses over one or two years and usually wins over ten.
The breakeven year is where those curves cross - the point where staying put has recovered the transaction costs. If you might move before your breakeven year, renting is usually the safer financial choice, even when the monthly mortgage looks cheaper than rent.
What the Numbers Can't Tell You
The Honest Caveats
Every input here is an assumption about the future. Home appreciation averaged around 4% annually over the long run nationally, but individual markets and decades vary wildly. Stock returns average higher but swing harder. Small changes to those two inputs can flip the verdict, so treat the result as a well-informed estimate, not a guarantee - and test a pessimistic scenario before deciding.
We also leave out mortgage interest tax deductions. Since the standard deduction roughly doubled in 2018, most homeowners no longer itemize, so for the typical buyer the deduction is worth far less than advertised. If you itemize with a large mortgage, buying looks modestly better than shown here.
The Renter's Discipline Problem
The rent-and-invest strategy only works if you actually invest. A mortgage is forced savings - every payment builds equity whether you're feeling disciplined or not. If the monthly difference would realistically get absorbed into spending rather than invested, the buying scenario is closer to your true outcome than the math suggests.
Reasons Beyond the Spreadsheet
Owning brings stability: no landlord selling the building, no surprise non-renewal, freedom to renovate, and a fixed principal-and-interest payment while rents keep climbing. Renting brings flexibility: the ability to chase a better job in another city, downsize after a life change, or walk away from a declining neighborhood with 30 days' notice. Those are real, valuable things that don't show up in a net worth number.
Mistakes to Avoid
- • Comparing your current rent to a mortgage on a much nicer home
- • Forgetting maintenance - roughly 1-2% of home value every year, forever
- • Assuming your local market will match national appreciation averages
- • Buying with a short time horizon and paying two rounds of transaction costs
- • Draining your emergency fund to reach a down payment number
Keep Exploring
Leaning one way? These can help you take the next step:
- • Read our full guide: Renting vs. Buying: What's Better for Your Financial Future?
- • If you're leaning toward buying, check the Home Affordability Calculator and the Mortgage Payment Calculator
- • If you're leaning toward renting, see what investing the difference could grow into with the Compound Interest Calculator
- • New to the process? Start with the First-Time Homebuyer's Checklist
Frequently Asked Questions
Is it cheaper to rent or buy a home?
It depends almost entirely on how long you stay, your local price-to-rent ratio, and what your down payment could earn invested elsewhere. Renting usually wins over short periods because buying and selling costs eat 8-9% of the home's value. Buying usually wins over long periods as equity builds and rent keeps rising.
How long do I need to stay for buying to be worth it?
A common rule of thumb is five years, but the real answer is your breakeven year, which this calculator shows. In expensive coastal markets with high price-to-rent ratios it can take 7-10 years; in affordable markets it can be as short as 2-3.
Is renting throwing money away?
No. Rent buys you housing, the same way mortgage interest, property taxes, insurance, and maintenance buy the owner housing - none of that builds equity either. In the early years of a 30-year mortgage, most of the payment goes to interest. The real question is which path leaves you with more wealth after all costs, which is what this calculator measures.
What is the 5% rule for renting vs. buying?
It's a quick shortcut: multiply the home price by 5% and divide by 12. If comparable rent is below that number, renting may be the better deal; above it, buying may be. The 5% approximates the owner's unrecoverable costs - property tax, maintenance, and the cost of capital. It's a useful gut check, but a full calculation like this one accounts for your actual rates and timeline.
What costs of owning do renters often forget?
Property taxes, homeowners insurance, maintenance and repairs (roughly 1-2% of home value per year), HOA dues, PMI if you put down under 20%, closing costs of 2-5% when you buy, and selling costs of 6-8% when you leave. The mortgage payment is often only two-thirds of the true monthly cost of owning.
What is the opportunity cost of a down payment?
It's what that money could have earned if invested instead of locked in the house. An $80,000 down payment earning 7% in an index fund would grow to about $157,000 in ten years. Home equity grows too, so this isn't an argument against buying - but any fair comparison has to count it, and most don't.
Should I buy if I might move in a few years?
Be cautious. If your likely timeline is shorter than the breakeven year the calculator shows, renting is usually the safer choice - transaction costs and early-mortgage interest make short ownership stints expensive. Job changes, relationships, and family plans are worth weighing as seriously as the interest rate.
Does this calculator include the mortgage interest tax deduction?
No, deliberately. Since the standard deduction increased in 2018, most homeowners no longer itemize, so the deduction provides no benefit to the typical buyer. If you have a large mortgage and itemize, buying performs somewhat better than shown - consider it a modest bonus rather than a deciding factor.