Rent vs. Buy Calculator — Compare Costs Over Time

The Formula

Compares the full lifetime cost of buying a home versus renting over your intended stay. Accounts for the initial cash outlay (down payment and closing costs), recurring ownership costs (mortgage principal and interest, property taxes, maintenance, insurance), and the equity built through loan paydown and property appreciation. On the renting side, tracks monthly rent payments that typically increase each year plus renter's insurance. The break-even year is when the cumulative cost of owning finally drops below the cumulative cost of renting.

Variable Definitions

How to Use This Calculator

1. 1

   Enter the home price, down payment percentage, mortgage rate, and expected annual appreciation rate. These are the core buying assumptions that drive the entire analysis.

2. 2

   Set closing costs (default 3%), annual property tax rate, and maintenance percentage. If unsure, keep the defaults which reflect national averages for typical single-family homes.

3. 3

   Enter your current monthly rent, expected annual rent increase percentage, and renter's insurance premium. Rent increases compound year over year just like investment returns.

4. 4

   Adjust the "Years You Plan to Stay" slider from 1 to 30 years and watch how the break-even indicator shifts. This is the most sensitive input in the model.

5. 5

   Compare the Net Cost to Buy versus Net Cost to Rent results. Buying wins over longer horizons of 7+ years; renting wins decisively for stays under 3-4 years.

6. 6

   If your break-even year is close to your planned stay length, try small adjustments to each input to test how sensitive the result is to your assumptions.

Rent vs buy — compare monthly payments, equity building, and lifetime costs

Understanding the Concept

Deciding whether to buy or rent is one of the most consequential financial decisions most households face. The core insight is straightforward: buying requires a large upfront investment (down payment and closing costs) but builds equity over time through loan paydown and appreciation. Renting requires minimal upfront cash and provides predictable monthly costs, but every dollar spent on rent is gone forever with no asset value created. Nationally, the break-even point when buying becomes cheaper than renting falls between 4 and 7 years. However, local market conditions dramatically affect this number. In high-cost coastal cities like San Francisco, Los Angeles, or New York, where home prices are high relative to local rents, the break-even may stretch to 10 years or more. In lower-cost Midwestern or Southern markets, buying can be cheaper than renting almost from the start. Edge cases worth considering: if you expect to move within 3 years, renting is almost always superior because transaction costs consumed at purchase and sale will eat any equity gains. If interest rates drop after you buy, refinancing can strengthen the buy-side economics. The calculator does not currently model the opportunity cost of using your down payment funds instead of investing them in the stock market, nor does it account for the mortgage interest tax deduction, both factors that can shift the comparison materially.

Frequently Asked Questions

Sources & References