Tools Rent vs Buy Calculator
Is it better to rent or buy a home?
Buying builds equity, but it also costs a lot to get in and out. Renting is flexible, and the money you don’t put into a home can be invested. Compare the net worth each path leaves you with after the years you expect to stay, and see the year buying pulls ahead.
Your result
| Mortgage principal and interest | |
|---|---|
| Property tax | |
| Homeowners insurance | |
| Maintenance | |
| Owning, all in | |
| Renting |
What to focus on next
How this calculator works
Buy = home value − loan left − selling costs (+ any savings invested)
Rent = down payment and closing costs invested + monthly savings invested
The calculator follows both paths month by month for the years you expect to stay. If you buy, your net worth at the end is what the home is worth, minus what you still owe on the mortgage, minus the cost of selling it. If you rent, you keep the down payment and the closing costs you would have paid, and they are invested from day one.
Each month it compares the full cost of owning (mortgage principal and interest, property tax, insurance and maintenance) with rent. Whichever path costs less invests the difference: when owning costs more, the renter invests the gap; when rent costs more, the buyer does. Investments grow at the return you set, compounded monthly. This is the fair comparison: renting only builds wealth if the money you don’t put into a home really gets invested.
The mortgage uses standard amortization, so the payment stays the same and more of it goes to principal over time: $300,000 at 6% for 30 years is $1,798.65 a month. The home’s value grows at the home price growth rate, and property tax, maintenance and insurance are reset each year from the home’s value at the start of that year. Rent rises once a year at the rent growth rate. The break-even year is the year from which buying leaves you with more and stays ahead, checked up to 30 years even if you plan a shorter stay. If investments grow faster than the home, buying can lead for a few years and then fall behind again; the result notes any lead like that.
Everything is in nominal dollars, not adjusted for inflation, so keep the rates consistent with each other. The calculator ignores income taxes, including the mortgage interest deduction and any tax on investment gains or a home sale, and it leaves out private mortgage insurance (PMI), HOA fees and moving costs. Home prices, rents and returns also don’t move in straight lines, so treat the result as a comparison of assumptions, not a forecast.
Words you’ll see
- Down payment
- The part of the price you pay in cash at purchase. The mortgage covers the rest.
- Amortization
- Paying a loan off in equal monthly payments. Early payments are mostly interest; later ones are mostly principal.
- Equity
- The part of the home you own outright: its value minus what you still owe.
- Closing costs
- Fees paid when a home changes hands, such as lender, title and recording fees. Buyers and sellers each pay their own.
- Opportunity cost
- What money could have earned elsewhere. A down payment tied up in a home can’t also be invested.
- Break-even year
- The year from which buying leaves you with more net worth than renting and investing the difference, and stays ahead.
Common questions
Is it better to rent or buy a house?
It depends mostly on how long you'll stay and how the rent compares with the full cost of owning. Buying usually wins when you stay long enough for the home's growth and your loan paydown to outrun the costs of buying and selling, which this calculator sets at 3% and 6% of the price by default. Renting usually wins for shorter stays, as long as you invest what you would otherwise have put into the home.
How long do you need to stay to make buying worth it?
Long enough to reach the break-even year, the year from which buying leaves you with more net worth than renting. With a $400,000 home, 20% down, a 6.5% 30-year mortgage, rent of $2,500 a month and this calculator's default assumptions, buying pulls ahead in year 7. At a rent of $2,000 a month, buying doesn't pull ahead within 30 years.
What is the 5% rule for renting vs buying?
The 5% rule, popularized by portfolio manager Ben Felix, puts the yearly unrecoverable cost of owning at about 5% of the home's value: roughly 1% property tax, 1% maintenance and 3% cost of capital. Multiply the price by 5% and divide by 12; if a similar home rents for less than that, renting is likely the better deal. For a $400,000 home, that line is about $1,667 a month.
What costs of owning a home do people forget?
Beyond the mortgage, owners pay property tax, homeowners insurance and maintenance, which a common rule of thumb puts at about 1% of the home's value a year. There are also closing costs when you buy, selling costs such as agent commissions when you sell, and sometimes HOA fees or private mortgage insurance with less than 20% down. For the $400,000 home above, tax, insurance and upkeep add about $870 a month to a $2,023 mortgage payment.
Does renting mean throwing money away?
No. Rent pays for a place to live, just as an owner's mortgage interest, property tax, insurance and upkeep do, and none of those build equity either. Renting comes out ahead whenever those owner costs plus buying and selling costs add up to more than rent, provided the renter invests the down payment and any monthly savings instead of spending them.
Sources
- Owning a Home: tools and resources for homebuyers — Consumer Financial Protection Bureau
- Compound Interest Calculator — U.S. Securities and Exchange Commission, Investor.gov
- Primary Mortgage Market Survey — Freddie Mac (weekly average U.S. mortgage rates, for a sense of typical rates)
This tool is for informational and educational purposes only. It is not financial, tax, or legal advice. Consult a qualified professional for guidance specific to your situation.