How the rent vs buy calculator works
Comparing a mortgage payment with rent is misleading — owning has many extra costs, but also builds equity. This calculator compares your net worth at the end of each path:
- If you buy: you pay the down payment and closing costs up front, then mortgage payments, property tax, insurance, HOA fees and maintenance. At the end, you own a home that has (hopefully) appreciated. Your net worth is the home’s value minus selling costs and the remaining loan.
- If you rent: you invest the money you would have spent on the down payment and closing costs. Each year, whichever option is cheaper invests the difference at your chosen return.
The option with the higher net worth after the years you plan to stay is the better financial choice under your assumptions.
What matters most
| Factor | Favors buying when… | Favors renting when… |
|---|---|---|
| How long you stay | You stay 5+ years | You may move within a few years |
| Price-to-rent ratio | Rent is high compared with prices | Prices are high compared with rent |
| Mortgage rate | Rates are low | Rates are high |
| Appreciation | Prices rise faster than inflation | Prices are flat or falling |
| Investment returns | Returns are modest | You reliably invest the savings at good returns |
The break-even point
Buying has large one-time costs: closing costs (often 2–5%) and selling costs (realtor commissions and fees, often 5–8%). It usually takes several years for equity and appreciation to make up for them. The calculator shows the year when buying pulls ahead.
Beyond the numbers
Owning gives stability, freedom to renovate and protection from rent increases. Renting gives flexibility, no surprise repair bills and less money tied up in one asset. Use the mortgage calculator to check the monthly payment, and the savings goal calculator to plan your down payment.
Frequently asked questions
Is it cheaper to rent or buy?
It depends on prices, rents, mortgage rates and especially how long you stay. Buying usually wins only if you stay several years.
How long do I need to stay for buying to make sense?
Often 5 years or more, because of closing and selling costs. The calculator shows your break-even year.
Does the calculator include tax deductions?
No. Since the 2018 tax changes, most US homeowners take the standard deduction, so mortgage interest deductions often don’t apply.
What does “invest the difference” mean?
The renter invests the down payment and any monthly savings. Without that, comparing rent and ownership isn’t fair.