Rent vs. Buy Calculator

Is it better to rent or buy?

It depends mostly on how long you stay, and after that on a handful of rates you have to guess. This calculator puts both choices on the same footing: the same cash at the start, the same monthly budget and the same number of years. It then compares what you would own at the end, as if you sold the home and moved out.

The headline says which path ends ahead and by how much. Underneath, it gives the first year at which buying would be ahead if you sold then, and the starting rent at which the two finish level. When buying never catches up within 30 years (or within your stay, if longer), it says so instead of showing a year.

How to use it

Start with the basics:

• Home price and Monthly rent for comparable homes: the rent you would pay now, from listings or your lease.
• Down payment, in dollars or as a percentage of the price. Press $ or % to switch.
• Mortgage rate: the fixed rate, not the APR. A Loan Estimate shows it along with the monthly payment, closing costs and estimated taxes and insurance.
• Years you plan to stay, in whole years. Both paths are valued at the end of that year.

The other groups hold example values until you replace them, and the page lists any still in use above the result:

• Buying costs: property tax and maintenance as a percentage of the home’s value per year, homeowners insurance and HOA dues in the period you are quoted (monthly, quarterly or yearly), closing costs as a percentage of the price, selling costs as a percentage of the sale price, the loan term and any PMI rate. With PMI entered, a further box asks at which loan-to-value it ends.
• Renting costs: the yearly rent increase and renters insurance.
• Growth rates: home appreciation (negative if you expect prices to fall) and the yearly return on money not spent on housing.

The Try buttons change the worked example below: a 3-year or a 20-year stay, 20% down with no PMI, flat home prices and paying cash. Press Save for comparison to keep up to three scenarios side by side, for two homes or two rents. Continue in the Loan Payment Calculator carries the mortgage over for its full amortization schedule.

How this comparison works, step by step

1. Same starting cash. The buyer spends the down payment plus closing costs; the renter invests that same amount on day one.
2. Same monthly budget. Each month, the owner pays principal and interest, property tax, insurance, maintenance, HOA dues and any PMI; the renter pays rent and renters insurance. Whichever path costs less invests the difference at the end of the month.
3. Yearly steps. Rent rises once a year. Property tax and maintenance are charged on the home’s value at the start of each year. Insurance, HOA dues and renters insurance stay flat.
4. Net worth at the end. The buyer sells at the end of the last year, pays selling costs and the remaining loan, and keeps any investments. The renter keeps the portfolio.

The yearly return $r$ is treated as an effective annual rate, so each month both portfolios grow by $j$. At the end of year $H$:

• $P$ is the price and $a$ the yearly appreciation, so $V_H$ is the sale price after $H$ years.
• $s$ is the selling cost as a share of the sale price.
• $B_{12H}$ is the loan balance after $12H$ monthly payments.
• $I_H$ is each path’s portfolio: every month it grows by $(1 + j)$ and then takes that month’s saving, if that path was the cheaper one.

The monthly principal and interest on a loan $L$ at the monthly rate $i$ (the yearly rate ÷ 12) over $n$ payments is $M = L\,i \div \left(1 - (1+i)^{-n}\right)$.

The down payment is not treated as spent. It becomes home equity, which the sale turns back into cash. What each side loses for good is interest, tax, insurance, maintenance, dues, PMI and transaction costs for the buyer, and rent and renters insurance for the renter.

Worked example: a $325,000 townhouse or $2,100 rent for 10 years

These are the calculator’s example values, not current market figures.

1. Starting cash: $32,500 + 2.5% × $325,000 ($8,125) = $40,625. The renter invests it.
2. Loan: $325,000 − $32,500 = $292,500 at 6.25% ÷ 12 = 0.520833% a month for 360 months, so principal and interest are $1,800.97 a month. PMI is 0.6% × $292,500 ÷ 12 = $146.25 a month, charged through payment 106, when the balance falls to 78% of $325,000 ($253,500).
3. First month: owning costs $1,800.97 + $243.75 property tax + $270.83 maintenance + $125.00 insurance + $150.00 HOA dues + $146.25 PMI = $2,736.81. Renting costs $2,100.00 + $15.00 = $2,115.00. The renter invests the $621.81 difference.
4. Growth: 6% a year is (1.06)^(1/12) − 1 = 0.486755% a month. Over 10 years the renter adds $40,880.37 of monthly differences. Once PMI stops, rent has risen enough that owning is the cheaper path, so from month 107 the buyer invests the difference: $1,250.88 in all.
5. Renter after 10 years: the $40,625 grows to $72,753.19 and the monthly additions to $60,544.96, for $133,298.15.
6. Buyer after 10 years: the home is worth $325,000 × 1.035¹⁰ = $458,444.60. Selling costs take $27,506.68 and the loan balance is $246,395.31, leaving $184,542.61 of equity, plus $1,286.81 of investments: $185,829.42.
7. Result: $185,829.42 − $133,298.15 = $52,531.28 in favor of buying. Buying first comes out ahead in year 6.

Amounts are rounded to the cent from unrounded values, so a sum of rounded parts can be a cent off.

Net worth at each year-end, if the home were sold then:

The starting rent at which both paths would finish level after 10 years is $1,819.81. At the example’s $2,100, buying wins; at $1,800, renting would.

How long do you need to stay for buying to pay off?

In the example, 6 years; at 5 years the two are only $231.64 apart. Early on, the buyer is behind mainly because of transaction costs: $8,125 to buy and 6% of the price to sell. That cost is paid once, whenever you leave, so each extra year gives appreciation and loan repayment longer to cover it.

The Stay 3 years button shows the short end: renting is ahead by $13,498.05. Stay 20 years shows the long end: buying is ahead by $295,506.10, because rent keeps rising while principal and interest stay fixed.

The year in the result is found by checking every year-end, not only yours, up to 30 years or your stay if longer. The chart continues past your stay when buying pulls ahead later, so you can see the lines cross.

What buying really costs (beyond the mortgage payment)

Principal and interest are only part of it. Owning adds property tax, homeowners insurance, maintenance, any HOA dues and PMI every month, and closing and selling costs at either end. In the example, the first month’s $1,800.97 of principal and interest is $2,736.81 once everything is counted, $621.81 more than renting.

The table Costs you don’t get back totals each item over your stay: $326,587.58 for the owner and $297,431.11 for the renter in the example. How each net worth adds up then starts both paths from the same money set aside ($378,936.47 in the example: the starting cash plus the larger of the two monthly costs each month), takes away those costs and adds each path’s gains, so each column ends at that path’s net worth.

PMI protects the lender, and you may have to pay it on a conventional loan with less than 20% down. Servicers generally must end it when the balance is scheduled to reach 78% of the home’s original value, you can ask for it to be canceled at 80%, and it ends after the loan’s midpoint regardless. The calculator uses the percentage you enter, measured against the purchase price, and stops at the midpoint. With 20% down, no PMI, the example’s buyer comes out ahead by $75,866.42 after 10 years, and from year 4.

Why the down payment’s investment return matters

The renter’s result rests on investing the starting cash and every monthly saving, and on the return you enter. Use the return you would expect after fund fees, before tax, from what you would actually hold for that many years. A suitable mix depends on your time horizon and how much risk you can accept, and a higher expected return comes with a bigger chance of losing money.

The return works on the renter’s portfolio, while appreciation works on the whole house. That is why paying cash can still come out ahead: with Pay cash (no loan) the renter starts with $333,125 invested, yet buying ends $89,362.07 ahead after 10 years, from year 4. If some of the monthly difference would be spent instead of invested, the renter’s result here is too high.

Which assumptions change the answer most?

Home appreciation and the investment return are the two you can know least, so the table Buying minus renting … at other growth rates reruns the calculation with appreciation 1 and 2 points either side of yours and the return 2 points either side. Part of it for the example, in whole dollars:

A positive amount means buying ends ahead. At a 6% return, two points less appreciation cost the buyer $68,761.16 and two points more add $82,459.61. At 3.5% appreciation, two points of return move the result by $20,002.63 one way and $23,319.06 the other. Appreciation applies to the whole $325,000 house, the return only to the smaller portfolio. With Home prices flat, renting is ahead by $60,035.61 after 10 years, and buying doesn’t catch up until year 17.

The mortgage rate, property tax and maintenance rate also matter a lot, because they are charged every month from the start. The rate and closing costs come from lender quotes and the property tax from the local tax office; base the tax on the price you would pay, as it usually rises with the home’s value.

Reading the result

• The headline is the difference in net worth at the end of your stay, and which side it favors.
• Net worth if you buy is the sale price minus selling costs and the remaining loan, plus anything the buyer invested. Net worth if you rent is the renter’s portfolio, split into the grown starting cash and the grown monthly savings.
• Buying first comes out ahead is the first year-end at which selling would leave the buyer at least level.
• Owning cost, first month is the total monthly cost of owning, next to renting, and who invests the gap.
• Starting rent for a tie is the rent, rising at your rate, at which both paths finish level after your stay. It is exact, because the difference between the paths changes in step with the rent.
• How this was calculated walks through the same steps as the worked example with your numbers, including the spreadsheet formula for the payment.
• The chart and the year-by-year table show both net worths at every year-end, with the home value, loan balance, the buyer’s investments and each year’s costs. Download CSV saves the table.
• Costs you don’t get back and How each net worth adds up split the result into what each path paid for good and what it gained.
• At other growth rates repeats the headline difference for nearby appreciation and return rates, with every other input unchanged.

What this calculator leaves out (income taxes, moving costs)

• Income taxes. Mortgage interest is deductible only if you itemize. The renter’s investment gains are taxable when sold. A gain on selling your main home can be excluded up to a limit if you have owned and lived in it long enough, generally 2 of the last 5 years. Which way leaving taxes out tilts the answer depends on your own tax situation.
• Uneven prices and repairs. Appreciation and maintenance are smooth here; real prices can fall for years, and a roof arrives as one bill.
• Flat costs. Insurance, HOA dues and renters insurance never rise, and rent grows at one steady rate.
• Inflation. Everything is in future dollars. Enter appreciation, rent growth and the return with the same inflation built in.
• Everything else: moving costs, differences in utilities, security deposits, broker fees and refinancing, as well as what the flexibility of renting or the control of owning is worth to you.

This is an educational estimate, not financial, tax or lending advice.

Common mistakes

• Comparing rent with principal and interest alone. The owner’s total monthly cost also includes tax, insurance, maintenance, dues and PMI. In the example that turns $1,800.97 into $2,736.81.
• Counting the down payment as money spent. It becomes equity. What matters is what it would have earned invested, which is why the renter invests it here.
• Ignoring selling costs on a short stay. They are a share of the whole sale price, not of your equity. In the example, selling after 3 years costs $21,620.00, about twice the $10,958.08 of loan repaid by then.
• A return the renter wouldn’t really get. An 8% return assumes the money is invested, left alone and not spent on something else.
• Mixing real and nominal rates. A return with inflation taken out, next to appreciation and rent growth with inflation in, tilts the result toward buying.
• Entering a monthly premium as a yearly one. Choose the period next to insurance, HOA dues and renters insurance to match how each is quoted.
• Assuming a seller or lender credit makes closing free. Such credits are usually paid back through a higher price, loan amount or interest rate, so keep closing costs in.