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Rent vs Buy Calculator

Comparing your rent to a mortgage payment is the wrong math — the mortgage builds equity, and the down payment could have been invested. Enter both sides honestly and see which path leaves you richer, year by year, with the breakeven point marked.

Should you rent or buy?

Enter your numbers — the chart tracks both net positions year by year: home equity minus everything paid in, against the invested down payment minus rent paid. The dashed marker shows the breakeven year.

Home price

The purchase price you are comparing against your rent.

Down payment %

Share paid up front — the renter is assumed to invest this instead. Under 20% adds estimated PMI until 20% equity.

Mortgage APR %

The fixed rate you would actually get.

Loan term

Shorter term builds equity faster.

Closing costs %

Lender fees and prepaid costs, as a share of the price.

Property tax % / yr

Annual tax as a share of the home's value.

Insurance % / yr

Homeowners insurance as a share of value.

HOA $ / month

Monthly association dues, if any.

Maintenance % / yr

Upkeep as a share of value — 1% a year is the classic rule.

Monthly rent

What a comparable rental costs you today.

Rent growth % / yr

How fast you expect rents to rise each year.

Home appreciation % / yr

Expected yearly rise in the home's value.

Investment return % / yr

What the down payment would earn if invested instead.

Stay (years)

How long you plan to stay put.

Stay:

Buying wins$68,427 over 10 yearsOwning pulls ahead in year 3. Net position at the end: −$186,512 owning vs. −$254,938 renting · estimated.

Owning net position · 10 yr−$186,512Home equity minus everything paid in

+$68,427Owning minus renting after 10 years (equity vs. invested down payment, costs counted on both sides)

Renting net position · 10 yr−$254,938Invested down payment minus rent paid

Owning net positionRenting net position

Each year-end net position: home equity minus everything paid in, against the down payment invested minus rent paid. The dashed marker shows the year owning pulls ahead.

Buying wins by $68,427 over 10 years — owning pulls ahead in year 3, once the equity you have built beats what the $92,000 up front would have earned invested. About $451,115 goes into the house over 10 years versus $343,916 in rent.

How it works: every year-end we compute two net positions. Owning = home value − remaining loan balance − (down payment + closing costs + all owning costs paid so far). Renting = (down payment + closing costs) grown at the investment return − all rent paid so far. The higher net position at your horizon wins; the breakeven year is the first year owning crosses above renting. Principal paydown counts as equity, not a cost — only interest, tax, insurance, HOA, and maintenance are true owning costs, plus estimated PMI at 0.5% of the loan per year while equity is under 20% (it drops off as equity builds). Selling costs are not included, so add roughly 6–8% of the price if you plan to sell. Estimates only, not financial advice.

How rent vs buy is calculated

The classic mistake is comparing rent to the mortgage payment. That flatters buying, because part of the mortgage payment comes back to you as equity — and it flatters renting, because it ignores what the down payment could have earned. A fair fight puts both sides on the same scoreboard: where does each path leave your net worth after N years?

The owning side starts underwater by the closing costs, then builds equity two ways — the loan balance shrinking and the home appreciating — while paying interest, tax, insurance, HOA, and maintenance. The renting side starts at zero, pays rent that grows every year, and meanwhile the would-be down payment plus closing costs compounds in an investment account. Whichever net position is higher at your horizon year is the winner.

The formulas

owning(k) = value(k) − balance(k) − upfront − owning costs through year k · renting(k) = upfront × (1 + return)^k − rent paid through year k · upfront = down payment + closing costs · breakeven = first year k where owning(k) ≥ renting(k)

The loan balance each year comes from the standard amortization formula, the home value compounds at the appreciation rate, and rent compounds at the rent-growth rate. Only the interest slice of the mortgage counts as a cost — the principal slice is equity you keep.

Worked example: a $400,000 home vs. $2,500 rent

A $400,000 home, 20% down ($80,000), 3% closing costs ($12,000), 6.75% APR on a 30-year loan, 1.1% property tax, 0.3% insurance, 1% maintenance, no HOA — against $2,500/mo rent growing 3% a year, 3% appreciation, 7% investment returns, over 10 years.

1. Day one: buying starts at −$12,000 (the closing costs, gone); renting starts at $0.

2. Year 1: owning costs $34,506 (P&I $24,906 + tax $4,400 + insurance $1,200 + maintenance $4,000) against $30,000 rent. Net positions: owning −$31,096, renting −$23,560 — renting leads.

3. The turn: equity compounds while rent keeps climbing. In year 3 owning crosses above renting and never looks back.

4. Year 10: owning −$186,512, renting −$254,938. Buying wins by $68,427.

5. The check: about $451,115 goes into the house over the decade versus $343,916 in rent — but $264,603 of that house money is equity you keep.

Where this comes in handy

Settling the "renting is throwing money away" debate: sometimes it is, sometimes it is not — the answer depends on rates, rent growth, and how long you stay. Run your actual numbers instead of arguing slogans.
Timing a purchase: slide the horizon chips from 5 to 20 years. If buying only wins at 15+ years and you might move in 7, that is your answer.
Sizing the down payment: a bigger down payment shrinks the loan and the interest — but it also shrinks the renter's investment account. The mortgage affordability calculator shows what price your income supports first.
Pricing the monthly payment either way: the loan payment calculator gives the exact P&I behind the owning side of this comparison.
Building the down payment fund: once buying wins, the savings goal calculator turns the down payment target into a monthly plan.
Learning the method: the free rent or buy guide walks through the fair comparison, the 5% rule of thumb, and the four forces that decide the answer.

Rent vs Buy Calculator — frequently asked questions

What does "net position" actually mean?

It is where each choice leaves your wealth. Owning net position = home equity (value minus loan balance) minus every dollar you put in: down payment, closing costs, and all owning costs. Renting net position = the invested down payment and closing costs, grown at your investment return, minus all rent paid. Negative numbers are normal — both paths cost money; the question is which costs less.

Why does the renter get to invest the down payment?

Because that money exists in both scenarios. The buyer locks it into the house; the renter keeps it working in the market. Ignoring the renter's investment — the opportunity cost — is the most common way rent-vs-buy math gets rigged in favor of buying. A fair comparison counts it on both sides.

What is the 5% rule of thumb?

A quick screen popularized by financial researchers: unrecoverable owning costs run about 5% of the home's value per year — roughly 1% property tax, 1% maintenance, and 3% cost of capital (mortgage interest plus the return you give up on the down payment). If annual rent is well below 5% of the price, renting usually wins; well above, buying usually wins. Use the calculator for the exact answer — the rule ignores rent growth and your time horizon.

How long do I need to stay for buying to win?

There is no universal number — the breakeven marker on the chart is your answer for your inputs. In expensive markets at high rates it can be 7–10 years; with cheap financing and fast-rising rents it can be 2–3. The pattern is consistent though: buying gets better the longer you stay, because equity compounds while the renter's rent bill never stops growing.

Does the calculator include the cost of selling?

No — and that matters. Selling typically costs 6–8% of the price in agent commissions and fees, which pushes the true breakeven 1–3 years later. If you know you will sell at the end of your horizon, mentally subtract that from the owning side before deciding.

My mortgage payment would be about the same as my rent — isn't buying the same cost?

No — the mortgage payment is only the start of the owning bill. Property tax, insurance, maintenance (about 1% of the value a year), and any HOA sit on top of it, while a renter's payment is the whole bill. In the worked example above, the $2,076 P&I payment comes with another $800/mo in tax, insurance, and maintenance. Compare total monthly owning cost to rent, not P&I to rent.

Is my mortgage principal payment a cost?

No — it is forced savings. Every principal dollar shrinks the loan balance and becomes equity you keep, which is why the calculator counts only interest, tax, insurance, HOA, and maintenance as owning costs. This is the single biggest conceptual fix in rent-vs-buy math: the "cost" of the mortgage is the interest, not the payment.

What if rents in my area are rising fast?

Raise the rent-growth input and watch the breakeven year move earlier — fast-rising rents are one of the strongest pro-buying forces, because the owner's P&I payment is fixed while the renter's bill compounds. At 5–6% annual rent growth, buying often wins within a few years even at today's rates.

Should I count the mortgage interest tax deduction?

Only if you itemize deductions, which fewer households do since the standard deduction rose. The calculator leaves it out, which keeps the owning side conservative — if you do itemize, the true breakeven lands a little earlier than shown. Renters get no equivalent deduction.

Learn the method: the free rent or buy guide walks through the fair net-position comparison, the 5% rule, and the four forces that decide the answer — step by step.