Rent vs. Buy Calculator
Renting vs. buying isn't just about the monthly payment. Buying builds equity but carries closing costs, maintenance, and taxes. Renting keeps capital free for investment. The winner depends on how long you stay and your local price-to-rent ratio.
Enter your home price, rent, and assumptions to see the year-by-year net worth comparison and the exact breakeven point where buying becomes cheaper than renting.
| Year | Buy Net Worth | Rent Net Worth | Buy Advantage |
|---|
The True Cost of Buying vs. Renting
Most people compare the monthly mortgage payment to monthly rent. This misses most of the financial picture. Buying has significant additional costs — closing costs, property taxes, maintenance, insurance — and significant additional benefits — equity buildup, appreciation, fixed payment vs. rising rent. Renting has the hidden benefit of keeping the down payment invested in appreciating assets.
The Costs Most Buyers Underestimate
On a $450,000 home with a 20% down payment at 6.8%: the mortgage payment is about $2,349/month. But add property taxes ($412/month at 1.1%), homeowner's insurance (~$150/month), and maintenance ($375/month at 1%/year) — total monthly cost exceeds $3,286. That's 49% more than the mortgage payment alone. Against a $2,200 monthly rent, the carrying cost comparison looks very different from the naive mortgage-vs-rent comparison.
| Cost Component | Monthly | Annual |
|---|---|---|
| Mortgage P&I | $2,349 | $28,188 |
| Property tax (1.1%) | $413 | $4,950 |
| Homeowner's insurance | $150 | $1,800 |
| Maintenance (1%/yr) | $375 | $4,500 |
| Total | $3,287 | $39,438 |
The Hidden Benefit of Renting: Opportunity Cost
The $90,000 down payment doesn't disappear if you rent — it can be invested. At 7% annual return over 10 years, $90,000 grows to about $177,000. Additionally, if the monthly mortgage cost exceeds the rent by $1,087/month (in the example above), that difference invested at 7% over 10 years adds another ~$180,000. The renter who invests the down payment and cost savings builds meaningful wealth too — it just looks different from home equity.
When Buying Clearly Wins
Buying wins decisively when you plan to stay 7+ years, your local price-to-rent ratio is under 20, home appreciation matches or exceeds stock market returns, and your carrying costs are close to comparable rent. In cities like Cleveland, Indianapolis, or Memphis, price-to-rent ratios of 10–14 make buying almost always better after 3–5 years. In San Francisco (ratio 40+) or Manhattan (ratio 50+), renting often wins even over 10-year horizons.
For the purchase side of the calculation, the Home Affordability Calculator shows the maximum home you should buy at your income and debt level. For the full mortgage cost breakdown, see the Mortgage Calculator.
Frequently Asked Questions
Is it better to rent or buy a home?
It depends on how long you stay, local prices, and your opportunity cost. Buying wins over 7–10+ years in most markets. Renting wins short-term (under 3–5 years) and in very expensive markets with price-to-rent ratios above 25–30. The breakeven is typically 4–7 years depending on local conditions.
What is the price-to-rent ratio?
Home Price ÷ Annual Rent. Below 15: buying clearly better. 15–20: neutral, depends on plans. Above 20: renting increasingly competitive. Above 30: renting often wins even long-term. US median is currently around 18–22 nationally, with wide regional variation.
What costs do most buyers forget?
Property taxes (0.5%–2.5%/yr), maintenance and repairs (1%–2%/yr), homeowner's insurance ($1,000–$3,000/yr), closing costs (2%–5% paid upfront), and HOA fees if applicable. These add 3%–5% of home value in annual costs on top of mortgage interest — often doubling the effective monthly cost beyond just the P&I payment.
How long do you need to stay for buying to make sense?
Typically 4–7 years in most US markets. Under 3 years: renting almost always wins because closing costs haven't been amortized. Over 7–10 years: buying almost always wins because equity has built up and your fixed payment beats rising rent. Your exact breakeven depends on local price-to-rent ratio and appreciation rate.
Is the down payment "lost" if you rent instead?
No — it's opportunity cost, not lost money. If you invest the $90,000 down payment at 7%/year instead of buying, it grows to ~$177,000 in 10 years. The rent vs. buy calculation must compare home equity + appreciation vs. investment returns on the down payment plus any monthly cost savings from renting.
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