Rent vs Buy Calculator
Compare the total cost of renting versus buying a home over time. Factor in appreciation, maintenance, taxes, and investment returns.
Buying a Home
Renting
Buy vs Rent Winner
Buying is Better
Saving you $45,000 over 10 years
Rent vs Buy Methodology
This calculator compares the net wealth you would have after a set number of years. For buying, it factors in equity built, home appreciation, and selling costs, minus all interest, taxes, and maintenance paid. For renting, it factors in the growth of your down payment in the stock market, minus all rent paid.
The Break-Even Year
Because of high upfront closing costs (buying) and agent commissions (selling), buying is almost always more expensive in the first 2โ3 years. The longer you stay, the more buying wins because your mortgage payment stays fixed while rents typically rise with inflation.
Frequently Asked Questions
- The decision depends on your time horizon, local market conditions, and personal lifestyle. Generally, if you plan to stay in one place for more than 5โ7 years, buying often builds more wealth through equity and appreciation. For shorter stays, renting is usually cheaper due to the high upfront costs of buying and selling.
- The break-even point is the year when the total cost of buying becomes less than the total cost of renting. This includes factoring in closing costs, maintenance, taxes, and insurance vs. rent inflation. Most homeowners break even between years 4 and 6.
- The 5% Rule is a quick estimate of the 'unrecoverable costs' of homeownership: 1% for maintenance, 1% for property taxes, and 3% for the cost of capital (interest/opportunity cost). If your monthly rent is less than 5% of a home's value divided by 12, renting may be the better financial move.
- Beyond the mortgage, homeowners must pay for property taxes, homeowners insurance, HOA fees, and maintenance (typically 1% of home value annually). Buying also involves 2โ5% in closing costs, and selling usually costs 5โ6% in agent commissions.
- When you buy, your down payment is 'locked' in the home. If you rent, you can invest that money in the stock market. If stock returns (historically ~10%) exceed home appreciation (historically ~4%), the opportunity cost may favor renting, especially in high-priced markets.
- Renting is better if: (1) You plan to move in less than 3 years; (2) The Price-to-Rent ratio in your city is over 20; (3) You want predictable monthly costs; (4) You want to invest your capital in more liquid assets; (5) You are in a high-interest rate environment where mortgage payments far exceed local rents.
- Higher interest rates increase the monthly cost of a mortgage and the total interest paid over the life of the loan. When rates are high, the 'cost of capital' component of buying increases, often making renting more attractive until home prices or interest rates drop.
- Not necessarily. In the first few years of a mortgage, most of your payment goes toward interest, not principal. If home values stay flat or decrease, and you factor in selling costs, you could actually lose money if you sell too soon.
- Total Rent = Monthly Rent ร 12 ร [(1 + inflation)โฟ โ 1] / inflation. If you start at $2,000/mo with 3% annual increases, you will pay over $275,000 in rent over 10 years. Unlike a mortgage, none of this is recoverable.
- Price-to-Rent Ratio = Home Price รท Annual Rent. < 15: Buying is much better. 16โ20: Neutral (depends on other factors). > 21: Renting is likely much better. For a $500,000 home renting for $2,500 ($30k/yr), the ratio is 16.7.