Rent vs Buy Calculator
Compare the costs of renting versus buying a home to see which is better for your situation.
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About the Rent Vs Buy Calculator
Buying isn't always better than renting. Whether ownership wins depends on how long you stay, how fast prices rise, what rent does, and what you'd earn investing the down payment if you rented instead. This calculator runs the side-by-side comparison; this page explains the inputs that actually drive the outcome.
The Formula
Buy cost over N years = Down payment + (Monthly payment × 12 × N) + Maintenance − Equity built − Sale proceeds at year N. Rent cost over N years = (Monthly rent × 12 × N, adjusted for annual rent increases). Compare net cost.
Worked Example
$400,000 home, 20% down ($80,000), $2,576/month PITI, 1% annual maintenance, sold after 7 years at 3% annual appreciation: total cost ≈ $216,000 minus $112,000 of equity and gain = net $104,000. Renting comparable at $2,200/month with 3% annual rent increases = $204,000 over 7 years. Buy wins by $100,000.
The break-even point
Most rent vs buy decisions break even at 4-7 years of ownership. Buy and stay less than that, transaction costs (6% to sell, 2-4% to buy) eat any appreciation. Stay longer and ownership tends to win. The exact break-even depends on local price-to-rent ratios.
Price-to-rent ratio: the single most useful metric
Divide local home prices by annual rent for an equivalent property. Below 15, buying is almost always better. 15-20, it depends. Above 20, renting and investing the difference usually wins. New York, San Francisco, and parts of LA routinely sit above 25 — buying there is a lifestyle choice, not a financial one.
What renters miss
Tax deductibility of mortgage interest (limited since 2018), property appreciation, and forced savings via principal paydown. What they avoid: maintenance (1-2% of value/year), property taxes, opportunity cost of locked-up down payment, and transaction costs.
Common Mistakes
- Comparing total mortgage payment to rent without accounting for maintenance, taxes, and insurance.
- Assuming home appreciation will continue at the rate of the last decade. Long-term real appreciation is closer to 1% above inflation.
- Forgetting the opportunity cost of the down payment. An $80,000 down payment invested at 7% becomes $137,000 in 7 years.
- Treating ownership as 'forced savings' while ignoring that principal paydown is slow in early years.
Frequently Asked Questions
How long do I need to stay for buying to make sense?
5+ years is the typical break-even. Less than 3 years almost never works financially due to closing costs.
Is buying always a hedge against inflation?
Only the mortgage payment is locked. Property taxes, insurance, and maintenance all rise with inflation.
This calculator is for informational purposes only and does not constitute financial, tax, or legal advice. Consult a licensed professional before making significant financial decisions.