Rent vs Buy Calculator
The home & your plan
Enter a home price to compare.
Advanced options
Enter a home price to compare.
How this is calculated
- 1Cash to buy = down payment + closing: $0 + $0 = $0. The renter invests that $0 instead.
- 2Each month both deploy the same cash — the cheaper option invests the difference at 7.0%/yr.
- 3Owning starts at about $0/mo (P&I + tax + insurance + upkeep + HOA); rent starts at $0/mo.
- 4After 1 yr, selling nets $0 of home equity (value − selling costs − loan); with side investments the buyer holds $0.
- 5The renter's invested pot grows to $0. Compared side by side, Too close to call.
Formulas
| Metric | Formula | Your value |
|---|---|---|
| Monthly cost to own | P&I + tax + insurance + upkeep + HOA | $0 |
| Home equity at end | Value − selling costs − loan balance | $0 |
| Net worth if you buy | Home equity + buyer investments | $0 |
| Net worth if you rent | Invested down payment + monthly savings | $0 |
| Net-worth difference | Buy net worth − rent net worth | $0 |
| Break-even year | First year buy ≥ rent | Year 0 |
Your inputs
| Input | What it is | Your value |
|---|---|---|
| Home price | Purchase price of the home | $0 |
| Down payment | Share of price paid upfront in cash | 0% |
| Monthly rent | Monthly rent for a comparable home | $0 |
| Years you'll stay | How long you plan to stay | 1 yr |
| Home appreciation / year | Assumed yearly change in home value | 3.0% |
| Investment return | Return on cash invested instead of buying | 7.0% |
Know what this estimate is based on
- Jurisdiction
- United States — Truth in Lending (Regulation Z) governs the APR and the disclosures; pricing, underwriting and closing costs are the lender's and your state's
- Rules and time period
- Rates, fees and program limits are the figures you enter, not live quotes; FHA, VA and conforming limits change at least annually.
- Scope and limitations
- Educational estimate only. A lender may use a different compounding convention, day count, fee schedule, escrow or rounding rule, and eligibility, mortgage insurance and tax treatment turn on facts this page never sees. Only a Loan Estimate or a signed note binds a number.
- Source links checked
- Sep 19, 2026
Built and regression-tested by Smart Tools Lab. It has not been individually reviewed by a licensed financial, tax, or legal professional.
How to use
- 01
Enter the home price, your down payment, the mortgage rate and the term — the buying side of the comparison.
- 02
Enter the monthly rent for a genuinely comparable home. The comparison is only honest if the two options are the same standard of living; a cheaper flat against a larger house measures lifestyle, not tenure.
- 03
Set how many years you plan to stay. This is the single most decisive input, because buying carries large one-off costs at both ends that only a long enough stay can absorb.
- 04
Open Advanced and set the assumptions that drive the answer — home appreciation, rent growth and your expected investment return. Small changes here move the break-even year substantially, which is worth seeing for yourself.
- 05
Still in Advanced, set the ownership costs: property tax, insurance, maintenance, closing costs on the way in and selling costs on the way out.
- 06
Read the recommendation, the break-even year where buying overtakes renting, the side-by-side net-worth chart and the year-by-year table beneath it.
Formula
This tool compares the two paths on net worth, not just the monthly payment. Both 'you' deploy the SAME cash each month: whoever has the lower housing cost invests the difference, and both side-portfolios grow at your investment return. The buyer also builds home equity. Buyer net worth = home sale proceeds + side investments where sale proceeds = home value − selling costs − remaining loan Renter net worth = the invested down payment, closing costs and monthly savings Every year is valued as if you sold then (selling costs included), so the break-even year is the first year the buyer's net worth catches up to the renter's. The recommendation is simply whichever net worth is higher at your time horizon.
Example
On a $500,000 home with 20% down, a 6% / 30-year loan and $2,200/month rent, buying costs more month-to-month (≈$3,400 vs $2,200) but builds equity. With 3% appreciation, 3% rent growth and a 6% investment return, renting and investing the difference stays ahead for the first several years while the buyer recovers the ~9% in closing and selling costs. Around the break-even year the lines cross; stay well past it and buying pulls ahead, while a short stay favors renting.
Definitions
- Break-even year
- The year your net worth as an owner overtakes your net worth as a renter who invested the difference. Before it, renting was ahead.
- Invest the difference
- The assumption that makes the comparison fair: a renter puts the down payment and any monthly saving into investments rather than spending it.
- Net worth comparison
- Both paths measured on the same basis — home equity after selling costs for the owner, portfolio value for the renter.
- Home appreciation
- The assumed annual rise in the home's value. Historically modest in real terms once inflation is removed, and highly variable by location.
- Rent growth
- The assumed annual rise in rent. A renter's cost rises over time; an owner's principal and interest does not.
- Closing costs
- The transaction costs of buying, commonly 2-5% of the price, paid in cash and not recoverable.
- Selling costs
- Agent commission and transfer costs on exit, commonly 6-10% of the sale price. Together with closing costs they are why short ownership rarely pays.
- Maintenance
- Ongoing upkeep an owner pays and a renter does not, commonly budgeted at 1-2% of home value a year.
- Opportunity cost
- The return the down payment would have earned if invested instead. Real, and invisible on a bank statement.
- Equity
- The share of the home you own — value minus the outstanding loan. It grows through principal payments and any appreciation.
- Principal paydown
- The portion of each mortgage payment that reduces the balance. Often called forced saving, because it converts cash into equity whether or not you meant to save.
- Imputed rent
- The rent you avoid paying by living in a home you own. It is the real economic benefit of ownership, and it never appears as income.
- Price-to-rent ratio
- Home price divided by annual rent for a comparable property. A rough screen: high ratios favor renting, low ratios favor buying.
- Transaction friction
- The combined cost and time of buying and selling. It is what makes a home a poor asset to hold briefly, regardless of the market.
Good to know
What this comparison actually measures
The question is not whether owning a home is good. It is whether, over the number of years you will actually stay, buying leaves you wealthier than renting the same standard of home and investing the money buying would have consumed. That second clause is what makes the comparison honest, and it is the one usually left out. Buying requires a large sum up front — the down payment plus closing costs — and produces a monthly cost that includes items a renter never pays: property tax, insurance, maintenance. If a renter simply spends all of that, then of course the owner ends up ahead. But that compares saving with spending, not renting with buying. So the calculator assumes the renter invests the difference: the down payment goes into a portfolio, and any month where renting costs less, the gap is invested too. Both paths are then measured on the same basis — the owner's equity after selling costs against the renter's portfolio value. The assumption is also the model's weakest point, and it is worth being honest about. Most renters do not invest the difference. If you would not, the owner's forced saving through principal payments is a genuine behavioral advantage, and the calculator will understate buying for you specifically. The tool cannot know which kind of person you are; you can. The other thing it measures is the effect of time. Buying carries heavy one-off costs at both ends — a few percent of the price going in, six to ten percent coming out. Those costs do not shrink with a shorter stay; they are simply spread over fewer years. That is why the horizon field moves the answer more than almost anything else, and why the honest response to "should I buy?" usually begins with "how long will you be there?"
The break-even year and why it is the number to read
The break-even year is the point at which the owner's net worth overtakes the renter's. Before it, renting was the better financial decision. After it, buying is, and the gap generally widens from there. It is the single most useful output on the page, because it converts an unanswerable question into a checkable one. Instead of "is buying a good idea?" you get "buying pays off after roughly seven years — am I confident I will be here that long?" That is a question you can actually answer. What drives it is mostly cost structure rather than market forecast. Closing costs are money spent that produces no asset. Selling costs, dominated by agent commission, remove a slice of the sale price at the end. Together they commonly total near a tenth of the purchase price, and the early years of a mortgage build very little principal because almost every payment is interest. So an owner who sells after three years has paid a lot and accumulated little, and needs appreciation to have covered the difference. The break-even also moves with things you set in Advanced. A higher assumed home appreciation pulls it earlier; a higher assumed investment return for the renter pushes it later. A larger gap between the monthly cost of owning and the rent moves it in the obvious direction. Because these assumptions are uncertain, the most informative thing you can do is run the calculation twice — once optimistically and once conservatively — and see whether the answer survives both. If buying only wins under the optimistic set, you are making a market bet rather than a housing decision. One practical note: your intended stay and your actual stay are different distributions. Jobs change, families change, and the median owner moves sooner than they expected to when buying. Treating your stated horizon as a firm number is optimistic in itself.
The costs of owning that never appear in the payment
A mortgage payment is not the cost of owning a home, and the difference is where rent-versus-buy comparisons usually go wrong. Maintenance is the largest omission. Roofs, boilers, water heaters, appliances, exterior paint, plumbing — all of it falls on the owner, and none of it is optional. A common budgeting guide is one to two percent of the home's value each year, which on a $400,000 home is $4,000 to $8,000 annually, or several hundred dollars a month that the mortgage payment never showed. Some years it is nothing; the year the roof fails, it is a decade's worth at once. Property tax rises indefinitely and does not stop when the mortgage is paid off. Homeowners insurance is required and has risen steeply in areas exposed to weather risk. Both are collected through escrow with the mortgage, so they feel like part of the loan when they are actually independent and growing costs. Closing costs, commonly 2 to 5 percent of the price, are paid in cash at purchase and buy nothing you can sell. Selling costs — agent commission plus transfer taxes and fees, commonly 6 to 10 percent — come off the top at the end. And then the cost nobody sees: the return the down payment would have earned invested. Money in a house is not idle in the sense of being wasted, but it is not compounding in a market either, and over a long horizon that foregone return is a real number. The calculator accounts for it by giving the renter that money to invest. Set each of these honestly in Advanced. The temptation is to enter low maintenance and low selling costs because they make the answer more comfortable, and the result is a break-even year that arrives years earlier on paper than in life.
Appreciation: the assumption people are most confident and least right about
The home appreciation rate you enter drives the result more than almost any other assumption, and it is the one most people set from recent memory rather than from evidence. Over long periods, United States house prices have risen roughly in line with inflation plus a modest margin, in real terms far below equity returns. Particular decades and particular metros have wildly outperformed that, and those are the periods people remember and generalise from. A rate set from the last few years of a hot market is a forecast, not a baseline. This matters because appreciation is doing heavy lifting in the comparison. It applies to the entire value of the home, not just your equity, which is the leverage effect: a 3 percent rise on a $400,000 house is $12,000, earned on a $40,000 down payment. That leverage is the genuine financial case for buying, and it works identically in reverse — a 3 percent fall costs the same $12,000 against the same $40,000. The useful discipline is to run the calculation at a conservative appreciation rate and see whether buying still wins within your horizon. If it does, the decision is robust. If buying only wins at an optimistic rate, you have learned something important: the purchase depends on the market cooperating, and you should size it accordingly. The same discipline applies to the renter's investment return. Setting it unrealistically low flatters buying just as an inflated appreciation rate does. A fair comparison uses assumptions you would defend for both sides — and the point of running both extremes is to find out whether your answer is a conclusion or an artifact of your inputs.
Rent is not thrown away, and neither is interest
"Rent is throwing money away" is the most repeated claim in this decision and it does not survive examination — but neither does the opposite dismissal of ownership. Rent buys shelter for a period. So does the interest portion of a mortgage payment, and so do property tax, insurance and maintenance. None of those builds equity. On a new 30-year mortgage the great majority of an early payment is interest, so the portion of an owner's monthly cost that actually accumulates wealth is much smaller than the payment suggests. Compare like with like and the wealth-building part of owning is principal plus appreciation, not the whole payment. What renting genuinely lacks is the forced saving. A mortgage takes the decision away: principal is paid whether or not you felt like saving that month. A renter must choose to invest, repeatedly, for years. The evidence that most people do not is the strongest practical argument for buying, and it is behavioral rather than financial. What renting genuinely provides is flexibility and cost certainty of a different kind. A renter can move for a job in a month. A renter does not pay for a failed foundation. A renter's exposure to one street's housing market is zero. In a period of uncertainty — early career, unstable industry, a relationship in flux — those are worth real money. The honest framing is that both are ways of paying for housing with different cost structures and different risks. This calculator prices the financial side of that at your numbers. It cannot price the value of being able to leave, or the value of being able to stay.
Taxes, and why the old advice about them is often stale
For decades the standard case for buying included a substantial tax benefit. For most buyers today that benefit is smaller than the advice assumes, and frequently zero. Mortgage interest and property tax are itemized deductions. They only reduce your tax bill if your total itemized deductions exceed the standard deduction — and since the standard deduction was raised substantially, the large majority of households take it and itemize nothing. If you do not itemize, mortgage interest saves you exactly nothing, regardless of how much of it you pay. The state and local tax deduction, which includes property tax, has also been subject to a statutory cap that has changed in recent years. Confirm the current limit for the year you are filing rather than relying on a figure from an older article, because this is an area where the rules have moved more than once. There is one tax benefit of ownership that remains large and is routinely forgotten: the exclusion of gain on selling a primary residence. Subject to ownership and use requirements, a substantial amount of capital gain on the sale of a main home can be excluded from tax — an advantage no investment account offers. For a long-held home in an appreciating market, this can be worth more than every year of interest deduction combined. And the benefit nobody counts at all: imputed rent. Living in a home you own means not paying rent, and that saving is not taxed as income while an equivalent return from an investment portfolio would be. It is a genuine structural advantage of ownership that never appears on any statement. This calculator does not model any of these, because they depend on your filing position. Treat the tax side as an adjustment you make yourself after reading the result, and be skeptical of any comparison that assumes a deduction you may not actually take.
Reading the result and deciding
The recommendation at the top is a summary of the arithmetic under your assumptions, not a verdict. The three things worth examining are the break-even year, how sensitive it is, and whether your horizon clears it comfortably. Start with sensitivity. Change the appreciation rate by a point in each direction and watch the break-even move. Do the same with the investment return and with maintenance. If the break-even shifts by a year or two, the conclusion is robust. If it swings by five, the answer is being produced by an assumption rather than by the facts of your situation, and you should treat it accordingly. Then apply a margin. If break-even lands at seven years and you expect to stay seven, that is not a comfortable margin — plans change, and the cost of being wrong is concentrated at the exit. A useful rule of thumb is to want a horizon meaningfully longer than the break-even, not equal to it. Then add what the model cannot see. Job stability, whether you would genuinely invest the difference, how much you value being able to change the place you live in, the local rental market's volatility, and whether you have the cash reserves to absorb a large repair without borrowing. These are not soft considerations; they change outcomes. And note what a strong result in either direction actually licenses. A clear win for renting does not mean never buy — it means not this house at this price on this horizon. A clear win for buying does not mean buy the maximum you are approved for; the comparison assumed a specific price, and stretching past it changes the arithmetic you just ran.
What this calculator does not model
The comparison here is a projection built on steady rates, and real life is neither steady nor tidy. Several things are outside it. Private mortgage insurance is not included, so a purchase with less than 20 percent down costs more monthly than modeled. HOA dues are not included, and where they apply they can be substantial. Neither is any specific tax treatment: no mortgage interest deduction, no property tax deduction, no capital gains exclusion on sale. Depending on your position, those omissions cut in both directions. Rate changes on an adjustable mortgage are not modeled; the calculation assumes the rate you enter holds for the term. Rental income from part of the property is not modeled, and for a buyer planning to let a room or a basement that can change the answer substantially. Appreciation and rent growth are applied as steady annual rates. Actual markets move in steps, sometimes sharply and sometimes downward, and the order in which those moves happen affects your position at any given exit year. A steady-rate model cannot capture the risk of needing to sell in a bad year, which is one of the real hazards of a short horizon. Transaction costs are entered as percentages and vary by market and negotiation. Maintenance is entered as a rate and arrives in lumps. Use this to size the decision and to find the horizon at which it turns. Pair it with the mortgage calculator for the payment you would actually carry, and the down payment calculator for the cash you would need to get to the table.
Frequently asked questions
Is buying always better than renting?
No, and the belief that it is has cost a great many people money. Buying wins over a long enough horizon in most markets, because transaction costs get amortized and rent keeps rising while principal and interest do not. Over a short horizon renting frequently wins outright. The honest answer depends on your price, your rent, your horizon and your market — which is what this calculator is for.
What is the break-even year and why does it matter?
It is the year your position as an owner overtakes your position as a renter who invested the difference. Buying costs a lot up front — down payment, closing costs — and a lot on the way out in selling costs. The break-even year tells you how long you must stay for those to be absorbed. If you may move before it, renting is very likely the better financial choice.
Why does the calculator assume a renter invests the difference?
Because otherwise the comparison is rigged. An owner is forced to save through principal payments; a renter is not. If the renter spends the down payment and the monthly difference, of course the owner ends up wealthier — but that compares saving with spending, not renting with buying. The assumption is also the weak point: most renters do not actually invest the difference, so the honest question is whether you would.
Isn't rent just throwing money away?
It buys you somewhere to live, the same as the interest, tax, insurance and maintenance an owner pays — none of which builds equity either. On a new mortgage the great majority of an early payment is interest, not principal. The part of a mortgage payment that actually builds wealth is smaller than most people assume, and the rest is a cost of housing exactly as rent is.
How much does the appreciation assumption matter?
A great deal, and it is the input people are most confident and least accurate about. Long-run house price growth in real terms has been modest, though recent decades in some markets have been dramatic. Try the calculation at a conservative rate as well as an optimistic one — if buying only wins under the optimistic figure, you are making a bet on the market rather than a housing decision.
What costs do people forget when they buy?
Maintenance, first: roofs, boilers, appliances and repairs, commonly budgeted at 1-2% of home value a year and paid by owners alone. Then closing costs on the way in and selling costs on the way out, which together can approach a tenth of the price. Then property tax, which rises indefinitely, and insurance, which has risen sharply in exposed areas. The monthly payment is not the cost of owning.