Rent vs Buy Calculator
The Question Every Renter Eventually Asks
Buying builds equity; renting avoids maintenance and ties up less cash. Both statements are true, and neither one settles the question on its own. What actually decides whether renting or buying wins over a given stretch of years is a pile of specific numbers — purchase price, mortgage rate, how fast rent climbs, what the down payment could have earned if invested instead — run against each other side by side. That's what this calculator does.
The Formula
Net Cost of Renting = Total Rent Paid − Investment Gain on the Down Payment + Closing Costs (invested instead)
Net Sale Proceeds is the projected future home value, minus the remaining mortgage balance at the end of the period, minus selling costs. The comparison period, appreciation rate, rent growth, and the return the buyer's cash would have earned if invested are all adjustable, because the "right" answer depends entirely on those assumptions.
Why This Is Harder Than It Looks
- The down payment has an opportunity cost. Cash tied up in a house isn't earning a market return elsewhere — the calculator credits the renter with what that money could have grown to.
- Carrying costs are easy to underestimate. Property tax, insurance, and maintenance (this calculator defaults maintenance to 1% of home value per year) add up to real money on top of the mortgage payment.
- Selling carries its own cost. A typical 6% selling cost on the future sale price quietly erases years of appreciation gains.
- Time horizon changes the answer. Buying usually loses in year one because of closing costs, then can overtake renting once enough principal and appreciation accumulate — which is why the comparison period matters as much as any single rate.
A Worked Comparison
Take a $450,000 home with 20% down at 6.5% interest over 30 years, versus renting an equivalent property at $2,600/month with rent rising 3% a year, comparing home appreciation of 3%/year against an investment return of 5%/year on the money not spent on a down payment:
| Years held | What typically happens |
|---|---|
| 2–3 years | Renting usually wins — closing costs and selling costs on the buy side haven't been offset by appreciation or principal paydown yet. |
| 5–7 years | The gap narrows sharply; the outcome becomes sensitive to the appreciation and investment-return assumptions. |
| 10+ years | Buying usually pulls ahead as accumulated equity and appreciation outweigh the fixed transaction costs. |
These are general tendencies, not a substitute for running your own numbers — the crossover point moves earlier or later depending on local price-to-rent ratios and the rates you enter.
How to Use This Calculator
- Enter Home Price, Down Payment %, Mortgage Interest Rate, and Loan Term.
- Enter Property Tax Rate, Annual Insurance, Maintenance Rate, and Monthly HOA to build the full ownership carrying cost.
- Enter Closing Cost % and Selling Cost % for the buy-side transaction costs.
- Enter Home Appreciation Rate and the comparable Monthly Rent with its own Annual Rent Increase %.
- Enter Investment Return Rate (the return the down payment and closing costs would earn if invested instead) and the Comparison Period in years.
- Select Calculate to see which option is cheaper over that period and by how much.
Related Calculations
Check what you could actually qualify to borrow with the Affordability Calculator, or estimate the upfront cash a purchase requires with the Closing Cost Calculator.