Rent vs Buy Calculator
- Updated
- Formula shown
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Results
Over 10 years, buying comes out $35,770 ahead; buying breaks even in year 7.
- Buying
- $211,081
- Renting
- $246,852
| Year | Buying | Renting | Buying minus renting | Home equity |
|---|---|---|---|---|
| 1 | $55,045 | $21,980 | $33,065 | $95,577 |
| 2 | $73,800 | $44,527 | $29,273 | $111,753 |
| 3 | $92,249 | $67,655 | $24,595 | $128,556 |
| 4 | $110,373 | $91,374 | $18,999 | $146,013 |
| 5 | $128,152 | $115,699 | $12,453 | $164,155 |
| 6 | $145,564 | $140,642 | $4,923 | $183,012 |
| 7 | $162,588 | $166,215 | −$3,627 | $202,618 |
| 8 | $179,200 | $192,432 | −$13,233 | $223,007 |
| 9 | $195,373 | $219,307 | −$23,934 | $244,216 |
| 10 | $211,081 | $246,852 | −$35,770 | $266,283 |
Buying cost = down payment, closing costs and every mortgage, tax, insurance, maintenance and HOA payment, minus the sale price after selling costs and the loan payoff. Renting cost = rent and insurance minus growth on the up-front cash invested instead. Taxes on gains, mortgage-interest deductions and PMI are not included.
How to use the rent vs buy calculator
- Enter how many years you expect to stay. This matters more than any other input.
- Fill in the home you would buy: price, down payment, mortgage, property tax, insurance, maintenance, HOA, and the costs of buying and selling.
- Enter the rent for a comparable home, how fast rents rise, renter's insurance and the return you could earn by investing the cash instead.
- Read which option costs less over your period, then check the table: it shows the result if you moved at the end of any year.
How the comparison works
Net cost of renting = Σ(rent + renter's insurance) − growth on (down payment + closing costs) invested
Break-even = first year where net cost of buying ≤ net cost of renting
Both sides measure the money that is really gone after a given number of years. A buyer gets most of their outlay back when they sell: the price minus selling costs, minus what is still owed. A renter keeps the cash a buyer would have spent up front and earns a return on it. The calculator steps through every month. The mortgage follows a standard amortization schedule, the home's value grows at your appreciation rate, and property tax, insurance and maintenance rise with it. Rent rises once a year.
Worked example
Take a $400,000 home with 20% down at 6.5% for 30 years ($2,022.62 principal and interest), 1% property tax, $1,500 insurance, 1% maintenance, 3% closing costs and 6% selling costs. The alternative is renting for $2,200 a month, rising 3% a year, while the $92,000 up-front cash earns 5%.
If you sold after one year, buying would have cost $55,045 against $21,980 for renting, because closing and selling costs swallow the early equity. After 10 years the owner has paid $445,110 in total, but would walk away with $234,029 from the sale: a net cost of $211,081. The renter has paid $304,710 but earned about $57,858 on the invested cash, for a net cost of $246,852. Buying wins by $35,770, and the break-even comes in year 7.
Break-even year by price growth and rent
Same home and assumptions as the example; the year in which buying first costs less than renting.
| Home price growth | Rent $1,800 | Rent $2,200 | Rent $2,600 |
|---|---|---|---|
| 0% a year | Year 30 | Year 21 | Year 13 |
| 2% a year | Year 20 | Year 11 | Year 6 |
| 3% a year | Year 13 | Year 7 | Year 4 |
| 4% a year | Year 8 | Year 5 | Year 3 |
| 5% a year | Year 5 | Year 4 | Year 3 |
With flat prices, buying takes a long time to pay off. With strong price growth or high rents, it can win within a few years. Small changes in these assumptions move the answer a lot, so try a pessimistic case as well as a hopeful one.
Things the numbers don't capture
- Taxes. The model leaves out the mortgage-interest deduction (which only helps if you itemize), tax on investment gains, and the US capital-gains exclusion on a home sale. Include them if they apply to you.
- PMI. With less than 20% down, add your monthly PMI to the HOA field to keep the comparison fair. The mortgage calculator shows when it drops off.
- Discipline. Renting only wins as calculated if the cash is really invested and left alone. A mortgage forces saving through principal repayment.
- Flexibility and control. Renting makes moving cheap and shifts repair risk to the landlord. Owning brings stability and freedom to renovate. Those trade-offs don't show up in dollars.
Ready to look at prices? Check what you qualify for with the house affordability calculator, and how much cash you need with the down payment calculator.
Frequently asked questions
Is it cheaper to rent or buy?
It depends mostly on how long you stay, local prices and rents, and how fast home values grow. In the example on this page, a $400,000 home with 20% down at 6.5% against $2,200 rent, buying costs more if you move within six years but is about $35,800 cheaper after 10 years.
What is the rent vs buy break-even point?
It is the first year in which the net cost of owning (everything paid, minus what you keep when you sell) drops below the net cost of renting (rent paid, minus what your down payment earned invested). With 3% yearly price growth the example breaks even in year 7; with prices flat, it takes until year 21.
Why does buying cost more in the first few years?
Closing costs when you buy and selling costs of around 6% when you sell are paid whatever happens, and early mortgage payments are mostly interest. If you sold after one year in the example, buying would have cost about $55,000 against about $22,000 for renting.
What investment return should I use?
Use a realistic long-run return on what you would actually do with the money. A safe savings account or bonds earn less than a stock index fund, which is more volatile. In the example, a 3% return favors buying more strongly, while at 7% the two options finish almost level after 10 years.
What does this rent vs buy calculator leave out?
It ignores income taxes (the mortgage-interest deduction, tax on investment gains and any capital-gains exclusion on the home), PMI and one-off events such as a major repair. Add your monthly PMI to the HOA field if you put down less than 20%.