Rent vs Buy Calculator
Should you rent or buy? Compare the true total cost of homeownership against renting, including mortgage payments, property taxes, maintenance, home appreciation, tax deductions, and the opportunity cost of investing your down payment instead.
Buy Scenario
Rent Scenario
Assumptions
Cumulative Net Cost Over Time
Net cost = total payments minus equity/investment gains. Lower is better.
After 7 Years
Key Factors
| Factor | Value |
|---|---|
Home Value at End $400,000 appreciated at 3%/yr | $491,950 |
Equity Built Home value minus remaining loan balance | $202,618 |
Remaining Loan Balance Outstanding mortgage after 7 years | $289,332 |
Monthly Mortgage Payment Fixed for 30-year term | $2,023 |
Renter's Investment Portfolio Down payment + monthly savings invested at 8% | $153,929 |
Opportunity Cost of Down Payment $80,000 invested at 8% instead | $57,106 |
Year-by-Year Comparison
| Year | Buy Net Cost | Rent Net Cost | Equity | Advantage |
|---|---|---|---|---|
| 1 | $14,328 | $17,095 | $95,577 | Buy +$2,767 |
| 2 | $28,378 | $34,685 | $111,753 | Buy +$6,307 |
| 3 | $42,135 | $52,780 | $128,556 | Buy +$10,646 |
| 4 | $55,582 | $71,394 | $146,013 | Buy +$15,811 |
| 5 | $68,704 | $90,537 | $164,155 | Buy +$21,833 |
| 6 | $81,482 | $110,222 | $183,012 | Buy +$28,740 |
| 7 | $93,896 | $130,460 | $202,618 | Buy +$36,563 |
Net cost = cumulative payments minus equity (buy) or investment value (rent). Does not include closing costs or selling costs, which would shift the break-even further into the future.
The Real Cost of Buying vs Renting
The rent vs buy decision is more complex than comparing your mortgage payment to rent. Homeownership has many hidden costs — property taxes, insurance, maintenance, HOA fees, closing costs, and the opportunity cost of tying up a large down payment. Renting has hidden benefits — flexibility, lower upfront costs, and the ability to invest the difference in diversified markets.
The Opportunity Cost of a Down Payment
A 20% down payment on a $400,000 home is $80,000. If invested in a diversified stock portfolio averaging 8% annual returns, that $80,000 would grow to roughly $172,000 in 10 years. This opportunity cost is one of the most commonly overlooked factors in the rent vs buy calculation.
The 5-Year Rule (and Why It's Oversimplified)
The common advice is “buy if you'll stay at least 5 years.” In reality, the break-even point depends heavily on your local market. In high-cost cities with strong rent-to-price ratios, the break-even can be 7–10+ years. In affordable markets with low property taxes, it can be as short as 2–3 years. This calculator computes your specific break-even year.
Mortgage Interest Deduction
The mortgage interest deduction only helps if you itemizeyour deductions. With the 2026 standard deduction at $15,000 (single) or $30,000 (married filing jointly), many homeowners don't have enough itemized deductions to exceed the standard deduction. This calculator estimates the incremental tax benefit of your mortgage interest above the standard deduction.
Home Appreciation Is Not Guaranteed
Historically, home prices have appreciated roughly in line with inflation (about 3–4% nationally). Some markets significantly outperform, others underperform or decline. Unlike a diversified stock portfolio, a home is a single, leveraged, illiquid asset concentrated in one geographic area.
Frequently Asked Questions
Does this calculator include closing costs?
This calculator focuses on the ongoing cost comparison. Closing costs (typically 2–5% of the home price for the buyer, plus 6–8% when selling) would shift the break-even further into the future, making buying relatively more expensive for shorter time horizons.
What about building equity?
Yes — the calculator accounts for equity buildup through both mortgage principal paydown and home appreciation. However, equity in a home is illiquid: you can't spend it without selling or borrowing against it.
Should I factor in emotional value?
This calculator only covers the financial comparison. Homeownership offers stability, customization, and pride of ownership that are worth something to most people — just make sure you understand the financial tradeoff you're making.