Rent vs Buy Calculator
Enter the home price, mortgage, ownership costs and your rent. The calculator compares your net worth as a buyer and as a renter year by year, including the return you could earn by investing the down payment instead.
Net worth over time
Year-by-year comparison
| Year | Home value | Loan balance | Owning cost | Renting cost | Buyer net worth | Renter net worth | Buy − rent |
|---|
Assumptions used in this comparison
- The buyer pays the down payment and closing costs up front. The renter invests that same amount instead and earns the investment return.
- Each month, whoever has the lower housing cost invests the difference at the investment return, so both sides spend the same amount of money.
- Owning cost = mortgage principal & interest + property tax + insurance + HOA + maintenance (− tax savings if enabled). Property tax and maintenance are a percentage of the home's current value.
- Rent, renters insurance, home insurance and HOA rise once a year by the rent growth rate. The home value grows monthly at the appreciation rate.
- Buyer net worth = home value − selling costs − remaining loan + invested savings. Closing costs are not recovered.
- Investment returns are compounded monthly and not taxed; capital gains on the home and portfolio, PMI and the standard deduction are ignored.
How to use the Rent vs Buy Calculator
- Enter the home details: price, down payment, mortgage rate, term and closing costs.
- Add ownership costs: property tax, insurance, HOA, maintenance, selling costs and expected appreciation.
- Enter your rent, renters insurance and how fast rent tends to rise.
- Set the investment return you could earn on money not spent on housing, and optionally the tax deduction.
- Pick the number of years you expect to stay and read the verdict, break-even year, chart and table.
How the rent vs buy comparison works
The fair way to compare renting with buying is to give both options the same amount of money and see who ends up wealthier. This calculator follows that idea month by month:
- Day one. The buyer pays the down payment plus closing costs. The renter keeps that cash and invests it at the investment return.
- Every month. The owner pays principal and interest, property tax, insurance, HOA dues and maintenance. The renter pays rent and renters insurance. Whoever pays less invests the difference.
- Any year. Buyer net worth = home value × (1 − selling cost %) − loan balance + invested savings. Renter net worth = value of the renter's investments.
The monthly mortgage payment uses the standard amortization formula M = L × i ÷ (1 − (1 + i)−n), where L is the loan amount, i the monthly rate (annual rate ÷ 12) and n the number of monthly payments. A $320,000 loan at 6.5% for 30 years costs about $2,022.62 a month in principal and interest.
Unrecoverable costs: the price of each option
A useful shortcut is to compare the costs you never get back. For renting it is the rent itself. For owning it is roughly property tax, maintenance, insurance, HOA, mortgage interest and the opportunity cost of your down payment, minus appreciation.
| Unrecoverable cost of owning | Typical size (share of home value per year) |
|---|---|
| Property tax | About 0.3% to 2.2% depending on the US state |
| Maintenance and repairs | About 1% (older homes often more) |
| Cost of capital (interest + lost investment return) | Mortgage rate on the loan, investment return on the equity |
| Closing and selling costs | About 2–5% to buy and 5–6% to sell, spread over the years you stay |
If those yearly costs add up to more than a year of rent for a comparable home, renting usually wins financially, and vice versa. Staying longer spreads the one-time buying and selling costs over more years, which is why buying tends to look better the longer you stay.
Which assumptions matter most
- Years you stay. Short stays rarely recover closing and selling costs.
- Home appreciation vs investment return. Appreciation applies to the whole home value (leverage), while the renter's return applies only to the cash invested. A small change in either can flip the result.
- Price-to-rent ratio. Divide the home price by a year of rent. Here $400,000 ÷ ($2,200 × 12) ≈ 15. Lower ratios tend to favor buying, higher ratios (above about 20) tend to favor renting.
- Mortgage rate. Higher rates raise the interest share of each payment, which delays the break-even year.
Try changing one input at a time and watch the chart. If the verdict flips with small changes, the decision is close and non-financial reasons, such as flexibility or stability, deserve more weight.
Frequently asked questions
How does the rent vs buy calculator decide which is better?
It compares net worth. The buyer's net worth is the home value minus selling costs and the remaining mortgage, plus any savings invested in months when owning was cheaper than renting. The renter's net worth is the down payment and closing costs invested on day one, plus the monthly difference whenever renting is cheaper.
What is the break-even year?
It is the first year in which the buyer's net worth is equal to or higher than the renter's. If you expect to move before that year, renting is usually the better financial choice under the same assumptions.
Why does buying often lose in the first few years?
Buying has large one-time costs: closing costs when you buy and selling costs (often 5 to 6 percent) when you sell. Early mortgage payments are also mostly interest. It takes several years of appreciation and principal repayment to make up for those costs.
What investment return should I use?
Use a realistic long-run return for what the renter would actually invest in. A diversified stock portfolio has historically returned more than a savings account but with much higher risk. Try a few values, for example 4, 6 and 8 percent, to see how sensitive the result is.
Should I include the mortgage interest deduction?
Only if you itemize deductions. Since the standard deduction is large, many homeowners do not itemize, so the deduction gives them no extra benefit. The option here assumes every dollar of interest and property tax is deductible, which overstates the benefit for most people.
Does the calculator include PMI or taxes on investment gains?
No. Private mortgage insurance, capital gains taxes, moving costs and the value of stability or flexibility are not included. Treat the result as a financial estimate, not a full decision.