The real question: which path leaves you richer?
Comparing a mortgage payment with rent misses most of the decision. Buying ties up a down payment and closing costs that a renter could invest, adds costs that rent already covers (property tax, insurance, maintenance), and ends with a sale that costs several percent of the price. In exchange, the owner builds equity through principal payments and appreciation, and locks most of the housing cost in place while rents rise.
The fair comparison is net worth at the moment you would move. This calculator runs both lives side by side, year by year. The buyer pays every cost of owning and ends with the home's value less the loan balance and selling costs. The renter invests the down payment and closing costs on day one, then each year invests whatever owning would have cost beyond rent. If renting ever costs more, the buyer invests the difference instead. Whoever ends with more is ahead.
How to use this calculator
- Start with how long you'll stay. It moves the answer more than any other input. Be honest: job changes and family plans count.
- Describe the home you'd buy. Price, down payment, rate, and term, plus closing costs (2 to 5% is typical) and the cost to sell (5 to 6% with an agent).
- Enter the costs of owning. Property tax rate, insurance, maintenance at about 1% of value a year, dues, and PMI if you'll put down less than 20%.
- Enter the rent for a comparable home. Compare like with like: the same size and location, not your current apartment.
- Set the market assumptions. Long-run US home prices have risen roughly 3 to 4% a year; a balanced stock and bond portfolio has returned more, with more volatility.
- Read the verdict, then the chart. The chart shows where the lines cross; the ledger below it shows every dollar each path paid.
Formulas & methodology
Upfront = Down payment + Closing costs
Owner cost = P&I + PMI + Value × tax % + Insurance + Value × maintenance % + HOA
- Value
- Home value at the start of the year
- PMI
- Until the balance reaches 78% of the price
Buyer = Value × (1 − selling %) − Loan balance + Buyer's invested savings
Renter₀ = Upfront
Renterₜ = Renterₜ₋₁ × (1 + return) + max(0, Owner cost − Rent)
First year Buyer ≥ Renter, and every year after
Rent, insurance, and dues grow at the rent growth rate; property tax and maintenance follow the home's value. Savings are invested at the end of each year. Income taxes are left out on both sides, as are the renter's insurance and moving costs, which are small and similar for both paths.
Worked example
A $400,000 home with 10% down at 6.25% takes $52,000 in cash to buy. A comparable home rents for $2,300 a month, a price-to-rent ratio of 14.5. In year one, owning costs $3,175 a month against $2,300 of rent, so the renter invests the difference on top of the down payment.
After 10 years, with 3.5% appreciation and a 6% investment return, the buyer would walk away with $227,129 after selling and repaying the loan, and the renter holds $193,069. Buying comes out $34,060 ahead. Buying pulls ahead for good in year 7. Leave after three years instead and renting leads by $23,054, because closing and selling costs haven't been earned back yet.
| After 10 years | Buy | Rent |
|---|---|---|
| Paid in housing costs | $338,940 | $323,786 |
| Principal paid down | $56,744 | — |
| Home value | $564,240 | — |
| Selling costs | $33,854 | — |
| Net worth from housing | $227,129 | $193,069 |
What tips the answer
- Time. Buying front-loads its costs. Each extra year spreads closing and selling costs thinner and adds a year of principal and appreciation.
- Price-to-rent. Where homes cost 20 or more years of rent, renting stays competitive for a long time. Under about 15, buying tends to win quickly.
- Appreciation against investment return. The buyer's wealth is leveraged to the home's price; the renter's to the market. A point of difference either way compounds over a decade.
- The mortgage rate. Higher rates raise interest, an unrecoverable cost, without changing rent. Refinancing later can help, but it isn't guaranteed.
- Discipline. The renting path only works if the savings are invested. A renter who spends the difference ends with less than the calculator shows.
Before deciding, check what a lender will actually approve with the home affordability calculator, and price the monthly payment in detail with the mortgage calculator.
The 5% rule shortcut
A quick check popularized by financial planner Ben Felix: an owner's unrecoverable costs run about 5% of the home's value a year, roughly 1% property tax, 1% maintenance, and 3% cost of capital. Multiply the price by 5% and divide by 12. If comparable rent is below that number, renting is likely cheaper; if it's above, buying is. For a $400,000 home, the line sits at $1,667 a month against rent of $2,300. The rule ignores time and transaction costs, which is what the full calculation adds.
Rent vs. buy FAQ
- Is it better to rent or buy a house?
- It depends mostly on how long you will stay, how home prices compare with rents where you live, and what your savings would earn if you rented. Buying carries large one-time costs, closing costs on the way in and selling costs on the way out, so it usually needs several years to beat renting. Where homes are expensive relative to rent, renting and investing the difference can stay ahead for a decade or more.
- How many years do you need to stay to make buying worth it?
- Often five to seven years, but it varies widely. In markets where prices are low relative to rents, buying can win in two or three years; where they are high, it may take more than ten. The calculator finds your breakeven year: the first year buying pulls ahead of renting and stays ahead.
- Is renting throwing money away?
- No more than mortgage interest, property taxes, insurance, and maintenance are. Owners also pay costs they never get back. What matters is which set of unrecoverable costs is smaller, and whether the renter actually invests the money they don't spend on a down payment and on owning. The calculator assumes they do.
- What is the price-to-rent ratio?
- The home price divided by a year's rent for a comparable home. A $400,000 house that would rent for $2,300 a month has a ratio of about 14.5. As a rough guide, ratios under 15 tend to favor buying and ratios above 20 tend to favor renting, though rates and how long you stay matter as much.
- Does the calculator include taxes?
- It leaves income taxes out on both sides, which keeps the comparison simple and fair in most cases. Most households now take the standard deduction, so mortgage interest rarely lowers their tax. Gains on a primary home are tax-free up to $250,000 ($500,000 for married couples) under Section 121, while a renter's investment gains may be taxed, which tilts real-world results slightly toward buying.
Rent vs. Buy Calculator by state
Each state edition starts from that state's typical home price, rent, property tax, and insurance, with a worked example and notes on local rules.
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