Rent vs buy calculator

Renting versus buying isn't a payment comparison. It's a net-worth race, and the money you'd sink into a down payment is a runner in it. This runs both sides with that money invested.

How the math works

The calculator doesn't compare a mortgage payment to a rent cheque. It runs a net-worth race. Two people start with the same cash — the down payment plus the closing costs of buying. One spends it on a house. The other keeps it invested, pays rent, and invests any month where owning would have cost more.

The buyer's side pays the mortgage, property tax, insurance, maintenance, and HOA every month. The house appreciates, the loan gets paid down, and at the end it sells — netting the sale price minus selling costs minus whatever is left on the loan. The renter's side just compounds the invested cash. At the end of the years you enter, the two ending net worths go head to head. The mortgage itself is the standard amortisation formula:

Where P is the amount financed, i is the monthly rate (the APR divided by 12), and n is the number of monthly payments. The reason this model tells you more than a payment comparison is the invested down payment. A renter who puts $80,000 into the market instead of into a house is running that money at a return. Leave that out and you've stacked the deck for buying — which is exactly what a payment-only comparison does.

Worked example

Start with the shortcut, because it needs no forecasts at all. Take a $400,000 home — a round hypothetical. The 5% rule says the yearly unrecoverable cost of owning it — the money that buys you nothing you keep — runs to about 5% of the value: roughly 1% property tax, 1% maintenance, and 3% cost of capital. That's $20,000 a year, or about $1,667 a month.

So the break-even rent is around $1,667. Rent an equivalent place for less and the unrecoverable-cost math favours renting; pay more and it favours buying. No appreciation guess, no rent-growth guess, no 30-year projection — one division.

Now the full model, which does make those guesses. Put 20% down on that $400,000 home at the 6.85% Freddie Mac average 30-year rate, rent the alternative for $2,000, and run the invested cash at the 7.0% long-run real return of the S&P 500. On those numbers renting stays ahead, and not by a little: the down payment compounding at 7% outruns a home appreciating near the 3.3% long-run inflation rate. Pull the investment return down toward the appreciation rate, or push appreciation higher, and buying takes the lead — sometimes crossing over inside a decade. The winner rides on the gap between those two rates, which is the whole point of the next section.

When this calculator is wrong

This calculator, and every rent-vs-buy calculator, rests on two numbers you are guessing: how fast the home appreciates and what the invested cash earns. Change either by a point or two and the answer can flip. Most calculators hand you a confident break-even year and never mention that it's built on forecasts.

• The result is a forecast, not a measurement. A tool that returns a break-even of 6.4 years is not more accurate than one that says "six-ish" — it just hides the guess better. Run it three times: your expected case, a pessimistic appreciation, and a pessimistic return. The spread between those runs is the real answer.
• It assumes you invest the difference. Most people spend it. The renter only wins by putting the down payment and every monthly saving into the market. A renter who spends the surplus instead ends up behind a homeowner who was force-saving through the mortgage. The math credits discipline the buyer doesn't need.
• The mortgage-interest deduction usually isn't yours. Calculators that add a tax break for owning assume you itemise. After the 2017 standard deduction increase, fewer than 12% of filers do. For a single filer to beat the 2024 standard deduction of $14,600, mortgage interest plus state tax plus charity has to clear that bar — and for most owners it doesn't. If a calculator's "buy" column includes a deduction you won't claim, it's overstating the case for buying.
• It prices the house, not the life. A paid-off place you can't be evicted from, or a rental you can leave in 30 days, are worth something the arithmetic can't hold. The number is one input to the decision, not the decision.

What to do with the result

Run the 5% rule first. If the rent on an equivalent place is well under the break-even figure, renting is likely the stronger money move and the full model is unlikely to overturn it. If rent is well above it, buying probably wins and the projection is mostly confirming what the shortcut already told you.

The full model earns its keep in the middle, where rent sits near the break-even rent. There, pull the two guesses toward caution: use a home-appreciation rate no higher than the 3.3% long-run inflation average, and an investment return you'd actually accept. If buying still wins under conservative assumptions and you're confident you'll stay past the break-even year, the case is solid. If it only wins on optimistic appreciation, you're betting on the housing market, not buying a home.

Common questions

Is it cheaper to rent or buy?

Over a short stay, renting is usually cheaper, because buying and selling costs — often several percent each — land in the first few years before appreciation and loan paydown catch up. Over a long stay with the down payment tied up in the home, buying tends to win. The break-even between them is what this calculator solves for.

What is the 5% rule for renting vs buying?

The annual unrecoverable cost of owning a home runs to about 5% of its value — roughly 1% property tax, 1% maintenance, and 3% cost of capital. Multiply the home price by 5% and divide by 12 to get the monthly rent that costs the same as owning. Rent below that and renting wins on unrecoverable cost; rent above it and owning does.

How many years do you have to stay for buying to pay off?

It depends entirely on your inputs, which is the honest answer most calculators dodge. With typical closing and selling costs, the break-even often lands somewhere in the first several years, but a higher investment return or lower appreciation pushes it out, sometimes past a decade. Run your own numbers rather than trusting a rule of thumb like "five years."

Does the calculator include the opportunity cost of my down payment?

Yes, and that's the point. The renter invests the down payment and closing costs at the investment return you set, so the money you'd lock into a house is earning on the other side of the comparison. A calculator that skips this quietly favours buying.

Should I count the mortgage-interest deduction?

Only if you'll actually itemise, which fewer than 12% of filers do after the 2017 standard deduction increase. If your mortgage interest, state tax, and charity don't clear the standard deduction, the deduction changes nothing for you, and a calculator that bakes it in is overstating the case for buying.