Rent vs. Buy Calculator

"Should I rent or buy?" is one of the biggest money questions most people ever face, and the honest answer is "it depends on the math for your situation." Buying isn't automatically "throwing money away on rent in reverse," and renting isn't automatically "throwing money away." What matters is the total net cost of each path over the years you actually plan to stay. This rent vs. buy calculator puts both paths on the same footing - including the equity and appreciation a buyer keeps, and the investment return a renter earns on the cash they don't tie up - so you can see which one leaves you better off, and after how many years.

A worked example

Take a $400,000 home bought with 20% down ($80,000) on a 30-year mortgage at 6.5%, with 1.1% property tax, $1,800/year insurance, and 1% annual maintenance. Assume the home appreciates 3.5% a year. The alternative is renting a comparable place for $2,200/month, with rent rising 3% a year, while the would-be down payment is invested and earns 6% a year. Over a 7-year stay, the buyer pays down principal and rides appreciation, ending with sizeable equity even after 6% selling costs; the renter pays steadily rising rent but grows their invested down payment. The calculator nets all of this out and reports which path costs less - and the break-even year where buying first pulls ahead of renting. Change any input and the verdict can flip, which is exactly the point.

The formula behind the comparison

Each side is reduced to a single "net cost" figure over your time horizon:

The path with the lower net cost is cheaper. The monthly principal-and-interest portion uses the standard amortization formula, M = P × r × (1+r)n ÷ ((1+r)n − 1) - the same math our mortgage calculator uses - and property tax and maintenance scale with the home's (appreciating) value, while insurance is held at the figure you enter. The break-even year is simply the first year in which the cumulative net cost of buying drops to or below the cumulative net cost of renting.

How to use this calculator

1. Home price & down payment: enter the price you'd pay and your down payment as a percentage. These set your loan size and up-front cash.
2. Mortgage rate & term: use a current quoted rate and pick a 30-, 20-, 15-, or 10-year term.
3. Appreciation: enter a realistic long-run home-price growth rate. This is one of the most influential inputs - keep it conservative.
4. Ownership costs: open the optional section to set property tax, insurance, and maintenance. Local property-tax rates vary widely, so use yours.
5. Rent & rent growth: enter what a comparable rental costs today and how fast you expect rent to rise.
6. Investment return: set the return you'd realistically earn investing the down payment instead. A diversified portfolio's long-run average is a sensible starting point - our investment calculator can help you estimate it.
7. Time horizon: enter how many years you'll stay. This single number often decides the whole comparison.

Hit Compare rent vs. buy and read the verdict, the side-by-side net costs, the buying and renting breakdowns, and the year-by-year table that reveals the crossover point.

Who this calculator is for

• First-time buyers weighing whether to keep renting and save, or buy now.
• Relocators unsure how long they'll be in a new city - the time horizon will likely decide it.
• Renters with a down payment saved who want to know the opportunity cost of locking that cash into a home.
• Couples and families comparing a specific listing against a specific rental.
• Anyone tired of one-line rules of thumb who wants the actual dollar comparison for their numbers.

Key terms explained

• Equity: the part of the home you actually own - its value minus the remaining loan balance. It grows as you pay down principal and as the home appreciates.
• Appreciation: the rise in the home's market value over time. It boosts a buyer's wealth but is never guaranteed and can go negative.
• Opportunity cost: the return a renter gives up by not investing the down payment - or that a buyer gives up by tying cash into a home.
• Selling costs: agent commissions and closing costs when you sell, commonly around 6% of the sale price, which eat into a buyer's gains.
• Break-even year: the year buying's cumulative net cost first matches or beats renting's.
• Net cost: total money spent on a path minus what you get back (equity and appreciation for buying; investment gains for renting).

Scenario 1: the short stay (3 years)

You take a job that might move you again in a few years. Even with the same $400,000 home, a 3-year horizon usually favors renting: you haven't paid down much principal, appreciation hasn't had time to compound, and you immediately lose roughly 6% to selling costs the moment you sell. The renter, meanwhile, kept their down payment invested. Short stays are the classic case where renting wins - which is why the conventional wisdom is to think hard before buying if you'll move within a few years.

Scenario 2: the long stay (10+ years)

Now assume you'll stay 10 years or more. Buying's up-front and selling costs get spread thin, principal pay-down accelerates, and a decade of even modest appreciation can dwarf the rent a renter would have paid - rent that has been climbing 3% a year the whole time. In most markets a 10-year horizon tips strongly toward buying, especially when appreciation outpaces the gap between owning and renting costs. The longer you stay, the more buying tends to win.

Scenario 3: expensive market, disciplined investor

In a high-price, low-yield market - think a $400,000 condo that rents for only $1,800/month - the cost of owning can far exceed rent, and a disciplined renter who reliably invests both the down payment and the monthly savings at a strong return can come out ahead even over long horizons. This is the case people mean when they say "renting and investing the difference beats buying." It hinges entirely on actually investing the difference, which many people don't.

What changes the result the most

• Time horizon: the single biggest lever - more years almost always favors buying.
• Home appreciation: a percentage point higher can swing the answer to buying; a flat or falling market favors renting.
• Investment return: a high assumed return makes renting-and-investing competitive; a low one favors buying.
• Rent vs. price ratio: cheap rent relative to home price favors renting; expensive rent favors buying.
• Mortgage rate: higher rates raise the cost of owning and push the break-even year later.
• Selling costs: the ~6% lost at sale is a real drag on buying, especially for short stays.

Tips for an honest comparison

• Compare like-for-like: use a rent and a purchase that represent the same standard of living, not a luxury condo versus a tiny studio.
• Be conservative on appreciation: long-run averages, not recent boom-year numbers.
• Be honest about investing: the renting case only works if you truly invest the down payment and the monthly difference.
• Test a range: run low, medium, and high scenarios for appreciation and investment return to see how robust the verdict is.
• Mind the time horizon: if there's any chance you'll move within a few years, weight that heavily.

Limitations and assumptions

• It assumes a fixed-rate mortgage and does not model PMI for down payments under 20%.
• It excludes tax benefits of owning (mortgage-interest and property-tax deductions, the capital-gains exclusion on a primary home), which can favor buying.
• It excludes closing/origination costs, HOA dues, and moving costs, which add to the cost of buying.
• The renter is modeled as investing only the lump-sum down payment, not month-to-month cash-flow differences - so in months when renting is cheaper, that extra isn't separately invested here.
• Appreciation, rent growth and investment returns are assumed constant; real markets are volatile and can move against either path.

How it compares to related calculators

This page answers "over my time horizon, is renting or buying cheaper?" For the next questions, a sister tool fits better:

• Once you decide to buy, size the monthly payment with the Mortgage Calculator.
• To find the maximum price your income supports, use the Home Affordability Calculator.
• To plan how much to save for the down payment, use the Down Payment Calculator.
• To see the month-by-month loan payoff, use the Amortization Calculator.
• If you already own and rates dropped, check the Refinance Calculator.
• To tap existing equity, see the HELOC Calculator.

Sources

• Consumer Financial Protection Bureau (CFPB) - Owning a Home: deciding to buy and the mortgage process.
• Consumer Financial Protection Bureau (CFPB) - Buying a house: answers to common questions.