Rent vs. Buy Calculator – Is It Cheaper to Rent or Buy?

Deciding whether to rent or buy a home is one of the biggest financial decisions you'll make. This calculator compares the true long-run cost of renting versus buying by accounting for mortgage payments, equity buildup, property taxes, maintenance, and the opportunity cost of tying up your down payment in real estate instead of investing it.

What This Calculator Includes

• Renting costs — monthly rent growing at your specified annual increase, plus renter's insurance
• Buying costs — mortgage payment, property tax, home insurance, HOA fees, maintenance, and upfront closing costs
• Equity accumulation — home appreciation and principal paydown reduce the net cost of buying over time
• Opportunity cost — the down payment and closing costs could instead be invested at your expected return rate; this investment gain offsets the cost of renting
• Mortgage interest deduction — reduces the effective annual cost of buying based on your marginal tax rate
• Break-even year — the first year when buying becomes cheaper than renting on a cumulative net-cost basis

How the Calculation Works

Net Rent Cost

Each year the cumulative rent paid (growing annually by your rent increase rate) is reduced by the hypothetical investment gain on the down payment and closing costs. If those funds were invested instead of used for a home purchase, they would compound at your expected investment return. This makes the rent comparison fair — it shows the true financial cost of renting after accounting for what else you could do with the capital.

Net Buy Cost

Cumulative buying outflows include closing costs (year one only), mortgage payments, property taxes, home insurance, HOA fees, and maintenance — minus the mortgage interest tax deduction. From this cumulative outflow the calculator subtracts your equity (current home value minus remaining mortgage balance). This gives the net cost of buying: what you've actually spent after accounting for the asset you've built.

Break-Even Year

The break-even year is the first year where the net cumulative cost of buying falls below the net cumulative cost of renting. Before this point, renting is cheaper; after it, buying is cheaper. If buying is always cheaper (even in year one), the result shows "Immediately." If renting stays cheaper for the entire time horizon, the break-even is "Never."

Key Inputs That Drive the Result

Years to Stay

This is the most sensitive input. Buying generally becomes more attractive the longer you stay, because closing costs and early interest-heavy payments are amortized over more years, and equity accumulates. Staying fewer than 3–5 years often favors renting.

Investment Return Rate

A higher assumed investment return makes renting more attractive, because the down payment could grow more quickly if invested. A common assumption is 6–8% for a diversified equity portfolio over the long run.

Home Appreciation

Higher home appreciation increases equity faster, tilting the result toward buying. US national home prices have historically appreciated around 3–4% per year on average, though local markets vary significantly.

Mortgage Rate

The mortgage rate directly affects your monthly payment and the interest portion of each payment. Higher rates increase the cost of buying and push the break-even year further out. A 1% change in rate on a $320,000 loan changes the monthly payment by roughly $185.

US-Specific Notes

US homebuyers should consider the following:

• Mortgage interest deduction — interest on mortgages up to $750,000 ($375,000 if married filing separately) may be deductible if you itemize. The deduction is most valuable in the early years of a mortgage when interest makes up most of each payment. This calculator applies your marginal tax rate to annual interest paid.
• Capital gains exclusion — up to $250,000 ($500,000 for married couples) of gain on a primary residence is excludable from capital gains tax if you have owned and lived in the home for at least 2 of the last 5 years. This can make home appreciation more tax-efficient than investment returns.
• PMI — Private Mortgage Insurance is required if your down payment is less than 20%, typically costing 0.5–1.5% of the loan annually. Factor this into your effective home insurance figure until you reach 20% equity.
• Property tax deduction — the SALT deduction (state and local taxes including property tax) is capped at $10,000/year for federal tax purposes.

What This Calculator Does Not Include

• Selling costs — real estate agent commissions (typically 5–6% in the US) and closing costs on resale significantly reduce net proceeds. For short holding periods, selling costs alone can exceed any appreciation gain.
• Rent vs. mortgage payment difference — if your mortgage payment is lower than rent, the surplus could be invested. If the mortgage is higher, the shortfall must be funded from income. This calculator captures the net cost difference but does not model re-investment of any monthly surplus.
• Inflation — the comparison is in nominal dollars. Over long periods, inflation erodes the real value of fixed mortgage payments (good for buyers) while also eroding the real value of investment returns (relevant for renters).
• Non-financial factors — stability, freedom to renovate, school districts, relocation flexibility, and emotional attachment are real considerations that numbers cannot fully capture.

For a comprehensive decision, consult a licensed financial planner or real estate advisor.