Rent vs Buy Calculator
Compare the true cost of buying a home with renting over the time you expect to stay. The calculator counts the mortgage, taxes, upkeep, appreciation, selling costs and what your down payment could have earned instead.
Over your time horizon
Worked example
Take a $400,000 home with 20% down, a 6.5% 30-year mortgage, property taxes of 1.1% and maintenance of 1% of the home's value a year, and $150 a month for insurance. The first month of ownership costs about $2,873, compared with $2,200 to rent a similar home.
Over seven years, owning costs $246,865 in mortgage payments, taxes, upkeep and insurance. If the home grows 3% a year, it sells for about $491,950. After 6% selling costs and paying off the remaining $289,332 loan balance, you walk away with $173,101. The $92,000 you put in at closing could have grown by $37,453 at 5% a year. The net cost of buying is $203,217.
Rent starting at $2,200 and rising 3% a year adds up to $202,289. In this example renting is cheaper by $928, which is practically a tie. Stay eight years and buying comes out about $8,169 ahead. Leave after five and renting wins by about $15,879.
Why the monthly payment is the wrong comparison
Comparing a mortgage payment with a rent check leaves out most of the money. Owners pay property taxes, insurance and maintenance on top of the mortgage. They also pay closing costs to buy and commissions to sell. On the other side, part of every mortgage payment builds equity, and the home may rise in value. A fair comparison adds up everything you pay and everything you get back over the time you actually live there.
How this calculator compares the two
- Net cost of buying = down payment + closing costs + every mortgage, tax, maintenance and insurance payment - your equity when you sell + the investment growth your down payment and closing costs gave up.
- Net cost of renting = the total rent you pay, with rent rising each year.
Equity at sale is the home's future value minus selling costs and the remaining loan balance. Taxes and maintenance are charged on the home's value each year, so they rise as the home appreciates.
To keep it simple, the calculator does not include the mortgage interest tax deduction, renters insurance, or investing the monthly difference between owning and renting costs. Most owners now take the standard deduction, so the interest deduction often makes little difference.
The inputs that matter most
- Time. Buying and selling costs together are often 8% to 10% of the price. You need several years of equity build-up and appreciation to earn them back, which is why short stays almost always favor renting.
- Price growth. Appreciation is the biggest swing factor and the hardest to predict. Run a low case of 1% to 2% as well as your expected case.
- Rent level. In expensive markets where rent is low relative to price, renting tends to win. Where rent is high relative to price, buying tends to win. The gross rent multiplier is a quick way to measure that ratio.
- Mortgage rate. Higher rates raise the interest you pay and slow equity build-up. The amortization calculator shows how much of each payment goes to principal.
- Return on cash. If you would invest the down payment, its expected return is a real cost of buying.
Beyond the numbers
Owning gives you control over the home and protection from rent increases, along with the work and surprise repair bills. Renting gives you flexibility to move for a job and keeps your cash available. If the numbers come out close, as in the example, those personal factors should decide it.
If you are weighing whether to keep your current home as a rental when you move, run it through the cash-on-cash return calculator and the cap rate calculator to see what it would earn as an investment.
Frequently asked questions
How long do I need to stay for buying to beat renting?
It depends on prices, rents and rates, but buying usually needs five to seven years or more to recover closing and selling costs. Change the years field to find the break-even point for your numbers.
Does this include the mortgage interest tax deduction?
No. Most households now take the standard deduction, so the interest deduction often has little effect. If you itemize, buying will look somewhat better than shown.
Why does the calculator count lost investment growth?
The down payment and closing costs could have been invested instead. The growth you give up is a real economic cost of buying, even though you never write a check for it.
What home price growth should I assume?
Long-run national home price growth has been roughly in line with inflation plus a little more, but local markets vary widely. Test a low case of 1% to 2% as well as your expected case.
Is principal paid on the mortgage a cost?
The calculator counts the full mortgage payment as money out, then credits the principal back through your equity when you sell. The net effect is that only interest, taxes, upkeep and transaction costs are true costs.
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Results are estimates for education only, not financial, tax or legal advice. Check numbers with your lender and advisors before you buy.