Rent vs. Buy Calculator

What this rent vs. buy calculator does

Renting and buying spend money in different shapes. Renting has no down payment but no equity either. Buying needs a large amount of cash up front and carries taxes, insurance, and maintenance, but part of every mortgage payment becomes ownership.

This calculator adds up both paths over a holding period and reports which one costs less, the year the answer flips, and how much home equity you would hold at the end.

How to use this calculator

1. Enter the home price, down payment, mortgage rate, and loan term.
2. Add the costs of owning: buying closing costs, property tax, insurance, HOA dues, maintenance, and the rates at which those costs and the home value grow.
3. Add the cost of selling, which is charged against the home value at the end.
4. Enter the current rent, the expected annual rent increase, the security deposit, and renter's insurance.
5. Choose a holding period and click Calculate.

The default example is a $500,000 home with 20% down at 7.108% over 30 years, rented for $3,000 per month. Over a 30-year horizon, buying becomes cheaper from year 6 onward, and net home equity at the end is $1,213,631.24.

Rent vs. buy formulas

Monthly mortgage = Amortized payment on (Home price − Down payment)
Buying cost over N years =
    Down payment + Buying closing costs
  + Σ (Mortgage payments + Property tax + Insurance + HOA + Maintenance)
  − (Home value after N years − Selling costs − Remaining loan balance)
Renting cost over N years =
    Σ (Rent × 12, growing each year)
  + Renter's insurance × 12 × N
  + Security deposit × Investment return × N
Break-even year = the first year in which buying cost ≤ renting cost

Carrying costs grow by the cost-increase rate, rent grows by the rent-increase rate, and home value grows by the appreciation rate.

What the results mean

• Break-even: the year buying overtakes renting on total cost. A short break-even means buying wins even if you move again soon.
• Total buying cost: everything spent on the purchase and ownership, net of what the sale returns.
• Total renting cost: rent, renter's insurance, and the return given up on the security deposit.
• Net home equity: home value minus the remaining loan balance at the end of the horizon.
• Cost difference: how much more the more expensive path costs over the horizon.

Assumptions and limitations

Both options are compared on nominal cash cost. The calculator does not model the income tax deduction for mortgage interest and property tax, the tax on a home sale, the investment return earned on money not spent on a down payment, HOA special assessments, major repairs, or moving costs. Maintenance is a flat percentage of the home price rather than an age-based schedule. Because tax deductions are excluded, this calculator tends to show a later break-even than tools that include them.

Frequently asked questions

Why does a longer horizon favor buying?

Buying front-loads costs — down payment, closing costs, and selling costs that you only recover if the home appreciates — while rent is paid in small amounts forever. The longer you stay, the more the upfront costs are spread out and the more equity you build.

Does a bigger down payment always shorten the break-even?

It lowers the mortgage payment, which helps every month, but it also ties up more cash that earns nothing in this model. The effect depends on the mortgage rate relative to appreciation and on how long you stay.

What if home prices fall?

Enter a negative expectation by setting appreciation to zero, or lower the sale assumption by shortening the horizon. The calculator will show buying losing its advantage, which is the realistic outcome in a flat or falling market.

Should I include the tax deduction for mortgage interest?

This calculator leaves it out because the benefit depends on whether you itemize, your marginal rate, and the state and local tax cap. Owners who itemize usually see an earlier break-even than the one shown here.

Reference table

Example cost comparison

The table is qualitative. Use the calculator with your local price, rent, rate, and horizon for a numeric comparison.

Source

References:

• Consumer Financial Protection Bureau — Owning a Home
• U.S. Department of Housing and Urban Development — Single Family Housing

Disclaimer

This calculator is for informational purposes only and is not financial, tax, or real estate advice. Home prices, rents, and interest rates are uncertain. Treat the output as a structured comparison of your own assumptions, not a prediction.