Rent vs Buy Calculator

Most people compare monthly mortgage payments to rent and call it done, but that misses three factors. Your down payment could be invested elsewhere earning returns while you rent. The home may rise in value, and each payment pays down the loan, which builds the equity you take away when you sell. Buying and selling a home also cost money. This calculator adds buyer closing costs (3% of the price unless you enter your own; the CFPB says they typically run 2% to 5%) but leaves out selling costs such as agent fees, which push the real break-even later than it shows.

The true comparison requires calculating total cost of ownership over your specific time horizon. Buying costs include your closing costs, your down payment, the mortgage payments made while you live there, property taxes and maintenance, minus your equity when you sell: the home's value then, less what you still owe on a 30-year mortgage. Renting costs include all rent payments over the same period, minus the investment growth your down payment would have earned in the stock market or other investments.

Break-even timing depends on your numbers. The Break-even Point is the first year in which buying has cost no more than renting under your inputs, including buyer closing costs but before selling costs such as agent fees. It also leaves out home insurance and the mortgage-interest tax deduction, does not invest the monthly difference between owning and renting costs for either side, and counts all amounts in dollars as paid, not adjusted for inflation.

Use this calculator when you have found specific properties and can input real numbers for purchase price, rent, and financing terms. It works best when you have a realistic timeline for how long you plan to stay in the area, whether for job stability, family considerations, or other life factors.

The tool is most valuable in borderline markets where rent and purchase prices are reasonably aligned. Where home prices are high compared with rents, renting tends to win for short stays; where rents are high compared with prices, buying pulls ahead sooner.

Do not rely solely on this calculator for markets with rent control, unusual HOA fees, or special tax situations like new construction exemptions. Also avoid using it if you are comparing fundamentally different properties - a rental apartment versus a house purchase involves lifestyle factors beyond pure financial comparison.

The biggest mistake is ignoring opportunity cost of your down payment. A $100,000 down payment invested at 7% annual returns grows to $197,000 over 10 years. Many buyers forget that the down payment could have been invested instead; an honest comparison credits the renter with that growth.

Another common error is forgetting transaction costs. This calculator includes buyer closing costs, but not agent fees, inspections or moving, so subtract your own estimate of those from any saving it shows for buying.

People also frequently compare current rent to mortgage payments without factoring rent increases. A $2,000 monthly rent rising 4% a year reaches about $2,850 a month in year 10, while a fixed-rate mortgage payment stays the same.

The calculation runs two parallel timelines to determine total costs. For buying, it calculates monthly mortgage payments using the standard amortization formula, then adds annual property taxes and maintenance costs that typically increase with home appreciation. These costs are offset by your equity at sale, which is the home's value after appreciation minus the balance still owed on a 30-year loan.

For renting, it projects rent increases over time and credits the renter with the growth the down payment would have earned at your investment return. The investment return assumption matters: on an $85,000 down payment, 8% instead of 7% adds about $16,300 of growth over 10 years.

Property taxes deserve special attention because they compound with home appreciation. A $500,000 home with 1.2% tax rate costs $6,000 annually initially, but if the home appreciates to $700,000 by year 10, taxes reach $8,400 that year. Maintenance is also modelled as a share of the home's value, so it grows with appreciation rather than with inflation.

A quick screen is the price-to-rent ratio: the home price divided by a year's rent. $400,000 against $2,200 a month is about 15. The higher the ratio, the more buying costs compared with renting, so the later the break-even. Run this calculator with your own numbers to see where it lands.