Rent or Buy Calculator
Compare the total cost of renting against the total cost of owning the same home over your expected time horizon.
What this calculator does
This rent versus buy calculator compares the total cost of renting against the total cost of owning the same home over time. Enter the home price, your down payment, the mortgage rate, and the monthly rent on a comparable property, and it returns the full monthly cost of ownership including taxes and insurance, the monthly rent, and the year in which buying pulls ahead.
The year-by-year table is the real output. It accumulates renting costs on one side and ownership costs net of equity on the other, so you can see the crossover rather than argue about it. Ownership starts far behind because of the down payment and closing costs, then closes the gap as principal builds and rent rises.
When to use it
Use it when you have a specific property and a specific rental in mind and want to know whether the numbers support the instinct. It works best as a horizon test: pick the number of years you are confident you will stay, then read that row.
It is also the right tool when a landlord raises your rent and you are wondering whether to buy instead, and when you are choosing between a cheaper condo with HOA dues and a pricier single-family home without them. Most usefully, it makes the case for continuing to rent legible — if you might take a job in another city inside three years, the table will show buying still underwater at year three, and that is the answer.
Understanding the inputs
Home price and down payment set the loan and therefore the interest, but the down payment does double duty here: it is also the sum the renter is assumed to invest at five percent a year. Comparable monthly rent must be genuinely comparable — the rent for a place you would actually accept, not the cheapest listing in the zip code.
The model assumes property taxes at 1.2 percent of value and maintenance at one percent per year. If you are buying in a Texas or New Jersey county where the effective rate is over two percent, ownership costs are materially higher than modeled. A newly built home will run below one percent maintenance for its first years; a hundred-year-old house will run well above it.
How is this calculated?
Compare total cost of ownership vs total renting cost over the time horizon.
A worked example
Consider a $420,000 home with 20 percent down, so an $84,000 down payment and a $336,000 loan at 6.5 percent over 30 years. Principal and interest come to about $2,124 a month. Property taxes at 1.2 percent add $420, insurance roughly $150, and maintenance at one percent adds another $350, for a total near $3,044 a month.
Against $2,200 rent, owning costs about $844 more per month, and the $84,000 down payment forgoes roughly $4,200 a year in investment returns. Offsetting that, the first twelve payments retire about $3,756 of principal — only 15 percent of the $25,490 paid. Buying is clearly behind in year one; it catches up because principal repayment accelerates while rent does not stand still.
Limitations and assumptions
The model uses fixed assumptions for maintenance, property taxes, and investment returns, and it does not let you vary home price appreciation or rent inflation, which are the two inputs that most influence the answer. It also excludes closing costs on purchase, typically two to five percent, and the agent commission on sale, historically around five to six percent though increasingly negotiable after the 2024 NAR settlement.
Tax treatment is not modeled at all, which is defensible for the majority who take the standard deduction but understates ownership's benefit for high-income itemizers. And it cannot price the things people actually care about: security of tenure, the freedom to renovate, or the ability to move in sixty days. Use the break-even year as one input into a decision that is not purely financial.
Common Questions
- How long do I need to stay for buying to win?
- In most US markets the break-even sits somewhere between four and seven years. Below that, the roughly six percent of sale price lost to agent commission and closing costs on the way out usually swamps the equity you built. The break-even year shown above is the number to compare against your realistic plans.
- Why is my mortgage payment higher than my rent but buying still wins?
- Because part of the payment is principal, which is savings rather than expense. In year one of a 30-year loan that slice is small — often only 15 percent of the payment — but it grows every month, and unlike rent it does not rise with the market each year.
- What costs of owning do renters never pay?
- Property taxes, homeowners insurance, PMI if you put down under 20 percent, HOA dues, and maintenance. Maintenance alone is conventionally budgeted at one percent of home value per year, which is $4,200 annually on a $420,000 house — real money that never appears on a mortgage statement.
- Does this account for the down payment I could have invested?
- Yes. The model assumes a renter invests the down payment and earns five percent a year on it. That opportunity cost is often the single largest item favoring renting: $84,000 invested at five percent generates about $4,200 in the first year alone, comparable to the entire property tax bill.
- How does the mortgage interest deduction change the math?
- Less than it used to. Since the standard deduction rose, most households no longer itemize, so mortgage interest and property taxes deliver no federal benefit at all. It matters mainly for high-income buyers with large loans in high-tax states, and the SALT cap limits the property tax portion.
- What if home prices fall after I buy?
- Then the break-even year moves out, potentially past your holding period. Buying with a small down payment magnifies this: a ten percent price fall on a home bought with five percent down wipes out your equity and leaves you unable to sell without bringing cash to closing. Short horizons and small down payments are a poor combination.
- Should I count rent increases?
- Yes, and it is the strongest argument for buying. A fixed-rate mortgage principal and interest payment never rises, while rent has historically climbed roughly three percent a year. Over ten years that compounds a $2,200 rent to about $2,950, while your loan payment stays exactly where it started.
- Is renting really throwing money away?
- No. Rent buys housing, flexibility, and freedom from a roof replacement. The equivalent owner costs — mortgage interest, taxes, insurance, maintenance, and commission on exit — are also unrecoverable. Compare the unrecoverable portion of each, not rent against the entire mortgage payment.
- Does buying make sense if I might relocate for work?
- Usually not. If there is a meaningful chance you move within three years, the round-trip transaction cost of roughly eight to ten percent of the price is very hard to recover. Renting and investing the difference is the lower-variance choice, and it keeps you able to accept an opportunity in another city.
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