Rent vs Buy CalculatorSee whether renting or buying leaves you wealthier — based on your real numbers.
Compare the full financial outcome of renting vs buying over any time horizon. See net worth, break-even year, equity growth, and opportunity cost side by side.
$80,000 upfront
Your results will appear here
Fill in your numbers and hit Calculate to see a full 30-year comparison.
Results are projections based on the assumptions you enter. Real outcomes depend on actual market conditions, tax laws, interest rates, and individual circumstances. This is not financial advice.
Rent vs Buy: What the Calculator Actually Models
Most rent vs buy tools only compare monthly payments. That is misleading. A $2,000 mortgage payment and a $2,000 rent payment are not equivalent — the mortgage comes with property taxes, insurance, maintenance, HOA fees, and tens of thousands in closing and selling costs. And the renter has an asset the buyer does not: the down payment, sitting in an investment account compounding over time.
This calculator models both paths honestly. The buying path accumulates home equity as the loan is paid down and the home appreciates — but subtracts every cost of ownership and the eventual selling costs when you leave. The renting path invests the down payment and any monthly savings (when rent is cheaper than the all-in buying cost) and compounds that at your expected investment return. The result is a true net worth comparison — not a marketing pitch for either side.
The Hidden Costs of Homeownership
First-time buyers are often shocked by the gap between their mortgage payment and their actual cost of ownership. On a $400,000 home, the additional costs can include:
- Property tax: $4,400/year at the national average of 1.1% — or up to $9,000/year in states like New Jersey or Illinois.
- Homeowner's insurance: $1,500–$3,000/year depending on location and coverage level.
- Maintenance and repairs: Financial planners recommend budgeting 1–2% of home value annually — that is $4,000–$8,000/year on a $400k home for HVAC, roof, plumbing, and appliances.
- Closing costs: Typically 2–5% of the purchase price at entry — $8,000–$20,000 that disappears on day one.
- Selling costs: Agent commissions, transfer taxes, and staging typically cost 5–7% of the sale price — another $24,000–$32,000 on a $400k home at exit.
These costs are why short-term buying is almost always financially worse than renting. The transaction costs alone can take 5+ years to recover through equity and appreciation.
What Is the Break-Even Point?
The break-even point is the year when buying's net worth (home equity minus selling costs) first surpasses renting's net worth (invested savings). Before that point, renting and investing the difference is the wealthier path. After it, buying pulls ahead.
In most US cities at current mortgage rates (around 7%), the break-even point falls between 5 and 9 years. In high-cost markets where rent is relatively cheap compared to purchase price, it can stretch to 10–15 years. In markets where rent is high and appreciation is strong, it may be as short as 3–4 years.
The most important thing: if you are not confident you will stay in a home past the break-even point, the data strongly suggests renting is the wealthier choice. Moving before break-even means absorbing all the upfront costs with none of the long-term appreciation gain.
The Opportunity Cost of the Down Payment
A 20% down payment on a $400,000 home is $80,000. That is $80,000 that could instead be invested. At a 7% annual return (S&P 500 long-run average after inflation), that lump sum grows to approximately $157,000 in 10 years and $305,000 in 20 years — without adding a single extra dollar.
This is what "opportunity cost" means in the rent vs buy debate. The down payment is not lost when you rent — it is deployed differently. Whether that investment outperforms home equity depends on market returns vs home appreciation, and this calculator lets you model both honestly.
When Does Buying Clearly Win?
Buying tends to be the financially superior path when:
- You plan to stay for at least 7–10 years in the same home.
- Local rents are high relative to home prices (low price-to-rent ratio).
- Home appreciation in your area has historically been strong.
- You value stability, the ability to renovate, and building roots in a community.
- You would not reliably invest the down payment and monthly savings if renting.
When Does Renting Clearly Win?
Renting and investing is often the wealthier path when:
- You are likely to move within 5 years — closing and selling costs will erase any gains.
- Local home prices are high relative to rents (high price-to-rent ratio — think San Francisco or Manhattan).
- Your expected investment returns are significantly higher than local home appreciation.
- You value geographic flexibility for career opportunities.
- Monthly rent is meaningfully cheaper than the all-in cost of owning a comparable home, freeing more money to invest.
Common Mistakes in the Rent vs Buy Calculation
The most common mistake is comparing monthly rent to mortgage payment and calling it done. The mortgage payment covers principal and interest only — it ignores property tax, insurance, maintenance, HOA, PMI, and the cost of the capital tied up in the down payment. A fairer comparison uses the total monthly cost of ownership against the monthly rent.
The second most common mistake is forgetting selling costs. Many buyers mentally book equity as profit without subtracting the 5–7% it costs to sell. On a $500,000 home, that is $25,000–$35,000 that never reaches your pocket.
Finally, people often assume renters "throw away" money while owners "build wealth." The reality is more nuanced: a renter who consistently invests the down payment and monthly savings difference often ends up in a comparable or better financial position — it depends on discipline, market conditions, and time horizon.
How We Calculate the Results
Every number in the results is derived from a year-by-year model, not a simple formula. Here's the logic behind each piece:
All calculations are performed client-side in your browser using your exact inputs. No data is sent to a server during calculation. Results are estimates for educational purposes and are not financial advice.
Frequently Asked Questions
Is it better to rent or buy a home?
There is no universal answer — it depends on how long you plan to stay, local home appreciation rates, your investment return assumptions, and the true all-in cost of ownership. In general, buying tends to outperform renting financially after 5–8 years in most US markets, but renting and investing the difference can win over shorter time horizons or in high-appreciation markets where rent is far cheaper than ownership costs.
What is the break-even point for buying vs renting?
The break-even point is the year when the buyer's net worth (home equity minus selling costs) first exceeds the renter's net worth (invested down payment plus monthly savings). Nationally, this is typically 5–8 years, but it varies by city, mortgage rate, and how much is invested if renting. This calculator shows you the exact break-even year for your specific numbers.
Does renting mean throwing money away?
Not necessarily. Every renter's payment covers a real service — housing — just as mortgage interest, property tax, insurance, and maintenance do for homeowners. What matters is the total financial outcome. Renters who invest the down payment and monthly savings difference can build significant wealth, particularly when investment returns exceed home appreciation.
How much does it cost to sell a house?
Selling costs in the US typically run 5–8% of the sale price. This includes real estate agent commissions (traditionally 5–6%), transfer taxes, title fees, and staging costs. On a $400,000 home, that is $20,000–$32,000 in transaction costs — a significant drag that makes short-term buying risky. This calculator includes selling costs in the break-even analysis.
What are the hidden costs of owning a home?
Beyond your mortgage payment, homeownership includes property taxes (typically 0.5–2.5% of value per year), homeowner's insurance (0.25–1%), maintenance and repairs (plan for 1–2% of home value annually), HOA fees where applicable, and PMI if your down payment is under 20%. Together, these can add $500–$2,000+ per month on a median-priced home.
What investment return should I use in the rent vs buy calculator?
The S&P 500 has returned roughly 10% annually before inflation and 7% after inflation over the long run. A common conservative assumption is 5–7% for a diversified index fund portfolio. Choosing a higher investment return generally favours renting (because the invested down payment grows faster), while choosing lower returns favours buying.
How does home appreciation affect the rent vs buy decision?
Home appreciation is the growth in your property's value over time. The US national average is roughly 3–4% per year nominally (around 0–1% after inflation). In high-demand cities like San Francisco or New York, appreciation can be much higher — which dramatically favours buying. In stagnant markets, it may be lower. Try adjusting the appreciation slider to see how it changes your outcome.
Methodology & Assumptions
This calculator models a standard 30-year (or custom term) amortising mortgage using the annuity formula. Home value, property tax, insurance, and maintenance grow with the home appreciation rate annually. Rent increases are applied once per year. The renter's portfolio is modelled as a lump-sum investment of the down payment plus closing costs on day one, plus monthly contributions equal to any excess of the all-in buying cost over rent, compounded at the investment return rate. The buyer's net worth is home equity minus projected selling costs at exit. Neither path accounts for income tax deductions (mortgage interest deductibility) or capital gains tax on investment or home sale — results are pre-tax estimates. Inflation is not applied to normalise values; all figures are nominal.
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