🤔 Rent vs Buy
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True Cost
🤔 Rent vs Buy Calculator
Enter home price, monthly rent, down payment, and your financial assumptions to compare the true total cost of renting vs buying over any time horizon. Includes home appreciation, opportunity cost of the down payment, all ownership costs, and net worth impact. See the break-even year and a personalised verdict for your situation.
🤔 Rent vs Buy Comparison
🔵 Renting
🟢 Buying
Shared Assumptions
️ Disclaimer: Projections based on inputs. Real estate and investment returns vary. Consult a financial advisor.
Year-by-Year Comparison
Run the calculator first to see the timeline.
| Year | Cumul. Rent Cost | Cumul. Buy Cost | Net Worth (Rent) | Net Worth (Buy) | Winner |
|---|---|---|---|---|---|
| Run the calculator first. | |||||
How Rent vs Buy Is Calculated
True Cost of Renting
Annual Rent Cost = Monthly Rent × 12 (growing each year)
Total Rent = Sum of all rent payments over N years
+ Renter's insurance payments
− Investment gains on down payment + monthly savings
Opportunity cost: If you rent instead of buy, you invest
the down payment at your expected return rate. You also
invest any monthly savings (if rent < mortgage PITI).
True Cost of Buying
Total Buy Costs = Down Payment
+ Closing Costs
+ All Mortgage Payments (P+I)
+ Property Taxes
+ Home Insurance
+ Maintenance (1-2% of home value/yr)
+ HOA Fees
+ Selling Costs (when you sell)
− Home Appreciation (equity built)
− Principal Paydown (equity)
Net Buy Cost = Total Costs − Net Proceeds from Sale
Net Worth Comparison
Renter Net Worth = Down Payment invested × (1+r)ⁿ
+ Monthly savings invested each year
(savings = how much cheaper rent is vs PITI)
Buyer Net Worth = Home Value after appreciation
− Remaining Loan Balance
− Selling Costs
Break-Even Year = Year when Buyer Net Worth > Renter Net Worth
(OR cumulative buy cost < cumulative rent cost)
Key Assumptions & Limitations
This calculator assumes:
Fixed interest rate (not ARM)
Constant appreciation rate each year
Renter invests the difference in savings
Standard tax treatment (no itemized deductions)
PMI not included (assumes 20%+ down)
Factors NOT modelled:
️ Tax deductibility of mortgage interest (varies)
️ Rent control laws in your area
️ Local market conditions
️ Transaction costs for investment portfolio
Frequently Asked Questions
No - it depends on how long you stay, the local price-to-rent ratio, your investment alternatives, and personal circumstances. Buying typically wins after 5–7 years in most markets if you stay put. In expensive cities with high price-to-rent ratios (above 25), renting and investing the down payment difference can build comparable or greater wealth over shorter time horizons. The calculator shows the break-even year for your specific numbers.
Price-to-rent ratio = Home Price ÷ Annual Rent. Below 15: favours buying. 15–20: neutral - use the full calculator. 20–25: generally favours renting. Above 25: strongly favours renting. Example: $600,000 home renting for $30,000/year = PTR 20 - borderline. $600,000 renting for $24,000/year = PTR 25 - renting is likely better unless staying 10+ years. The PTR is a quick filter - the calculator runs the full analysis with all costs included.
The break-even is the number of years after which buying becomes cheaper than renting on a total net wealth basis. In most US markets: 5–7 years. In expensive coastal cities: 10+ years. Factors that extend break-even: high transaction costs, slow appreciation, high price-to-rent ratio, strong investment returns for the renter. Factors that shorten it: fast appreciation, low price-to-rent ratio, rising rents. This calculator shows the exact break-even year given your assumptions.
A 20% down payment on a $500,000 home = $100,000. If instead invested in a diversified portfolio at 8% annual return, $100,000 becomes: approximately $147,000 after 5 years, $216,000 after 10 years, $466,000 after 20 years. The buyer's down payment also grows - through home equity and appreciation. The calculator compares both paths: the buyer's equity (mortgage paydown + appreciation − selling costs) versus the renter's investment portfolio (down payment invested + monthly savings invested).
US national average long-term home appreciation: approximately 3–5% per year (above inflation). Conservative estimate: 3–4%. Moderate: 4–5%. Optimistic: 6–7%. Some markets have seen 8–12% recently (Austin 2020–2023) but these rates are not sustained over 20–30 years. For planning purposes, use 3–4% for a conservative analysis, and see how the results change at 5–6%. The appreciation assumption is the most sensitive variable in the analysis.
S&P 500 historical long-term average: approximately 10% nominal, approximately 7% inflation-adjusted. Diversified stock/bond portfolio (60/40): approximately 6–8%. High-yield savings if money would stay in cash: 4–5%. Use 6–7% as a moderate baseline for a renter who would invest in a balanced portfolio. If the renter would not actually invest the difference, the buying side is relatively stronger - the calculator models the best-case renter (fully disciplined investor).
Beyond the mortgage: property taxes (1–2.5%/year), homeowner's insurance (approximately 0.5–1%/year), maintenance and repairs (1–2% of home value/year), HOA fees where applicable, buyer closing costs at purchase (2–5%), and seller closing costs when selling (5–6% including agent commissions). These additional costs typically add up to 3–5% of home value per year - more than doubling the effective monthly cost of ownership compared to the mortgage payment alone.
Rising rents make buying relatively more attractive over time. At 3% annual rent increases: a $2,500 rent today becomes $3,358 in 10 years and $4,508 in 20 years. A buyer with a fixed-rate mortgage pays the same P&I for 30 years - a significant advantage as rents rise. This calculator models rent increases. If you enter 0% rent growth, the calculator assumes flat rents, which understates the long-term advantage of buying in markets where rents typically track inflation.
Rent vs Buy Calculator - The Question Isn't Just About Monthly Payments
The mortgage payment vs monthly rent comparison is the wrong way to evaluate rent vs buy. A fair comparison must account for all the costs and benefits on both sides - homeownership costs beyond the mortgage (taxes, maintenance, insurance), the investment return on the down payment a renter keeps invested, home equity buildup, and the transaction costs of buying and selling. Only when all these are modelled does the real break-even become visible.
Why "the mortgage is less than rent" can still mean renting is better: A $500K home with 20% down at 7% = $2,661/month mortgage. But add property tax (~$500), insurance (~$200), maintenance (~$417) = $3,778/month true cost. If rent is $3,200 and you invest the $100K down payment + $578/month savings at 8% return: after 5 years, the renter's investment portfolio can outweigh the buyer's equity - especially if moving costs (5–6% of home price to sell) are factored in.
The Price-to-Rent Ratio - The Market Signal
The price-to-rent ratio (PTR) = Home Price ÷ Annual Rent gives a quick read on whether a market favours buying or renting:
PTR Interpretation
- Below 15: Strongly favours buying. Home prices are low relative to rent. Equity builds faster than rent.
- 15–20: Borderline. Use the full calculator with your specific assumptions.
- 20–25: Generally favours renting unless staying 8+ years with strong appreciation assumptions.
- Above 25: Strongly favours renting or very long time horizon needed. High-cost coastal markets.
PTR by Market Type (2025)
- San Francisco, NYC: 30–50+ (strongly renting)
- Los Angeles, Boston: 25–35 (favours renting)
- Austin, Denver: 18–25 (borderline)
- Chicago, Phoenix: 14–20 (borderline to buying)
- Detroit, Cleveland: 8–12 (strongly buying)
The Opportunity Cost of the Down Payment
A 20% down payment on a $400,000 home is $80,000. A renter who keeps that $80,000 invested in a diversified index fund at 8% annual return accumulates:
- After 5 years: $117,500 (vs the buyer's $80K down growing through home appreciation)
- After 10 years: $172,600
- After 20 years: $372,900
The buyer's down payment also grows - through home equity via mortgage paydown and appreciation. The question the calculator answers: which path builds more net worth after accounting for all costs and all investment returns? The answer depends heavily on the home appreciation rate assumption and the renter's actual investment discipline.
When Buying Is Clearly Better
- Long time horizon (7+ years): Transaction costs are amortised over many years; equity builds substantially.
- Low price-to-rent ratio (below 15): Buying is cheap relative to renting in that market.
- Strong local appreciation history: Markets with consistent above-average appreciation accelerate equity.
- Fixed vs rising rents: A fixed-rate mortgage provides payment certainty as rents typically rise 3–5%/year.
- Personal value of stability and control: No landlord risk, ability to renovate, stability for children's schooling. These non-financial factors matter and aren't captured in the calculator.
When Renting Is Clearly Better
- Short time horizon (under 3–5 years): Transaction costs alone (5–6% to sell + 2–3% to buy) require significant appreciation just to break even.
- High price-to-rent ratio (above 25): Renting the same quality home costs significantly less than owning it.
- Career or location uncertainty: Buying locks you in; mobility has real economic value in a dynamic job market.
- Renter investing the difference: A renter who genuinely invests the down payment and monthly savings differential can build comparable wealth - but this requires investment discipline.
How this calculator works, and where the numbers come from
The Rent vs Buy Calculator applies the standard formula for this calculation to the values you enter and updates the result as you type. The calculation itself happens in your browser, and the page explains the method so you can check any result by hand.
Please note: Results are estimates. Lender terms, local taxes and fees vary, so confirm figures with your lender or a qualified adviser.