Money tools
Rent vs Buy Calculator
Compare the true net cost of buying with renting over the years you plan to stay — every ownership cost, the equity you get back at sale, and what a renter earns by investing the down payment instead. See the break-even year and how the answer swings with your assumptions.
Year-by-year: what each path costs if you moved out that year
| Year | Net cost of buying | Net cost of renting | Home equity after selling costs | Renter’s investments | Ahead |
|---|
How this calculator works
The calculator walks both paths month by month for the years you plan to stay and adds up what each one really costs you — everything you pay out, minus everything you get back.
The cost of buying
- Down payment and closing costs on day one (closing costs as a % of price; 2–5% is typical).
- Mortgage principal & interest from the standard amortization formula, M = P · r(1 + r)n / ((1 + r)n − 1), the same one the mortgage calculator uses.
- Property tax and maintenance, each a % of the home’s current value, so they rise as the home appreciates.
- Home insurance and HOA dues in dollars, held flat.
- PMI at the annual rate on the loan amount, charged only when the down payment is under 20% and only until the scheduled balance reaches 80% of the original price.
- Selling costs when you leave (agent commissions, transfer taxes and fees; 5–6% of the sale price is common), taken off the sale price.
- Equity recovered — the appreciated value minus the remaining loan balance minus selling costs — comes back to you and is subtracted.
Net cost of buying = everything paid out − equity recovered at sale − any investment gains the buyer earned in months when owning was the cheaper path.
The cost of renting — and the opportunity cost
- Rent, rising once a year by your annual increase, plus renter’s insurance.
- The renter never hands over a down payment or closing costs, so they invest that cash at your investment return from day one.
- Each month, whichever path is cheaper invests the difference. Usually that is the renter (owning costs more per month in the early years); if renting ever costs more, the buyer invests the gap instead. The rule is symmetric, so neither path gets a hidden advantage.
Net cost of renting = all rent and insurance paid − the investment gains earned on the cash not spent.
Because both paths are charged the same total cash each month (the cheaper one banks the difference), the gap between the two net costs is exactly the difference in your wealth at the end. The break-even year is the first year in which selling would leave the buyer no worse off than the renter. To find it, the calculator simulates at least 30 years even if you plan to stay for fewer, and the year-by-year table shows the position at every year up to your horizon. Investment gains are shown before any tax on them; if you would pay capital-gains tax on the renter’s portfolio, the renting case is slightly better than reality.
Worked example
A $450,000 home with 10% down ($45,000) and a $405,000 loan at 6.9% over 30 years has principal & interest of about $2,667/month. Add property tax at 1.1% of value (~$413), maintenance at 1% (~$375), insurance ($150) and PMI at 0.5% (~$169) and owning costs about $3,774/month in year one, against $2,417 for a $2,400 rent plus renter’s insurance. Closing costs at 3% take another $13,500 up front.
Over a 7-year stay with 3% appreciation, 3% rent increases and a 5% investment return, the home is worth about $553,400 and the balance is down to about $368,600; after 6% selling costs (~$33,200) the buyer gets back roughly $151,700. Net cost of buying is about $231,100. The renter has invested the $58,500 the buyer spent up front plus the monthly difference, building a balance of about $204,800, and their net cost is about $177,900. At these numbers renting wins by about $53,200 over 7 years, and the break-even is not until year 18 — the mortgage rate is high relative to the rent, and a price-to-rent ratio of about 15.6 is only borderline.
Stay only 2 years and renting wins by about $45,900: the buyer has paid $13,500 to get in and about $28,600 to get out, while two years of payments have reduced the balance by only about $8,700. Raise the rent to $3,200 for a comparable home, though, and buying breaks even in year 5 and is ahead by about $33,800 after 7 years. Small changes to the inputs move the verdict — which is exactly why the calculator shows the break-even and the horizon sensitivity rather than a single number.
When renting usually wins
- Short stays. Closing costs going in and selling costs coming out can total 8–10% of the price; in the first few years that is more than the equity you build.
- High price-to-rent markets. When the home costs more than about 20 years of rent, interest, tax and maintenance on that price usually exceed the rent.
- High mortgage rates relative to rent, especially with a small down payment (more interest, plus PMI).
- Good returns available elsewhere. The higher the return your down payment could earn, the more owning has to appreciate to keep up.
When buying usually wins
- Long stays — the longer you own, the further behind you the one-off costs fall, and the more of each payment goes to principal.
- Rents rising quickly while a fixed-rate mortgage payment stays flat.
- A low price-to-rent ratio (roughly the mid-teens or below) or a rate well below today’s average.
- Strong, sustained appreciation — but treat this as a hope, not an input you control.
The assumptions that swing the answer most
- Home appreciation. In the example, 5% a year brings break-even to year 6; 1% pushes it to year 29. It applies to the whole home value, so it dominates.
- How long you stay. In the example renting wins by about $53,000 at 7 years and about $48,000 at 10, but buying is ahead by about $38,000 at 20 years.
- Investment return. At 3% the break-even moves to year 12; at 8% buying never catches up within 30 years.
- Rent growth. 5% annual increases instead of 3% bring break-even to year 11.
Tips
- Run three scenarios — pessimistic, expected and optimistic appreciation — and decide on the pessimistic one.
- Be honest about your horizon; the median stay is shorter than most buyers plan for.
- Compare like with like: the rent for a home you would actually buy, not the apartment you are in now.
- Check the payment first with how much house can I afford, then the full monthly figure in the mortgage calculator. Already own? See whether a lower rate pays off with the refinance break-even calculator.
Frequently asked questions
What does the break-even year mean in a rent vs buy calculation?
It is the first year in which selling the home would leave you at least as well off as if you had rented for the same period and invested the difference. Before that year, the one-off costs of buying — closing costs going in, agent commissions and other selling costs coming out — plus the early years of mostly-interest mortgage payments outweigh the equity you have built. After it, appreciation and principal paydown have caught up. Stay shorter than the break-even year and renting is the cheaper choice at your assumptions; stay longer and buying is.
Is renting throwing money away?
No. Rent buys you housing, and a large share of a homeowner’s monthly outlay also buys nothing you keep: mortgage interest, property tax, insurance, HOA dues, maintenance and PMI are all unrecoverable, and in the first years of a 30-year loan the majority of each payment is interest. The fair comparison is the unrecoverable cost of owning against rent, plus what a renter earns by investing the down payment, closing costs and any monthly saving. That is what this calculator does. Owning does force savings through principal paydown and can pay off over a long stay — but it is not automatically cheaper.
How much does the home appreciation assumption change the answer?
More than almost anything else. Appreciation is applied to the full home value, not just your down payment, so a percentage point either way moves the result by tens of thousands of dollars over a decade. In the default example, 3% a year gives a break-even in year 18, 5% pulls it to year 6, and 1% pushes it to year 29. Home prices have historically grown at roughly the rate of inflation over long periods with big regional and decade-to-decade swings, so test a low case as well as your hoped-for case, and remember appreciation is not paid to you until you sell — and selling costs come off the top.
How does PMI affect renting versus buying?
Private mortgage insurance is charged on conventional loans with less than 20% down, typically 0.3–1.5% of the loan amount per year, and it protects the lender, not you. It is pure cost with no equity behind it, so it tilts the early years towards renting. The calculator charges PMI each month until your scheduled balance reaches 80% of the original price, then drops it — the same rule the federal Homeowners Protection Act uses for cancellation on request. With 20% or more down, PMI is $0.
What is the price-to-rent ratio rule of thumb?
Divide the home price by one year of rent for a comparable home. As a rough rule of thumb, ratios in the mid-teens or below tend to favour buying and ratios above about 20 tend to favour renting, because the higher the price relative to rent, the more you pay in interest, tax and maintenance for the same roof. It is a screening shortcut, not a verdict: it ignores your mortgage rate, how long you will stay, appreciation and what your cash could earn elsewhere. Use it to sanity-check a market, then run the full numbers here.
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