Rent vs. Buy Calculator

Renting versus buying is one of the biggest money decisions most people make, and the right answer depends far more on the details than on slogans like "rent is throwing money away." This calculator looks only at the financial side. It assumes you can afford either option, that home values and rents grow at steady rates, and that any money not spent on housing would otherwise be invested.

The key output is the break-even period: the number of years you need to stay in the home for buying to cost less, on average, than renting a comparable place. Buying carries large one-time costs at both ends, closing costs to buy and commissions and fees to sell, so short stays favor renting. The longer you stay, the more those costs are spread out and the more equity and appreciation work in the owner's favor.

Treat the result as one input among several. Lifestyle, job security, family plans and the simple preference for owning or renting matter just as much, and small changes in appreciation, rent growth or investment return can move the break-even point by years.

What to Expect When Buying a Home

Buying usually starts with mortgage pre-approval, which tells you what a lender will offer based on your income, debts, credit and savings. With a budget in hand you shop for homes, usually with a buyer's agent, make an offer, and negotiate inspection and appraisal contingencies. Closing typically takes 30 to 45 days after an offer is accepted.

Upfront costs are substantial. A down payment of 20% avoids private mortgage insurance on a conventional loan, though many programs allow 3% to 5%, and FHA loans allow 3.5%. Closing costs add roughly 2% to 5% of the price for lender fees, appraisal, title insurance, recording fees and prepaid taxes and insurance. There are also moving costs, furniture and the repairs that new owners almost always find.

Ongoing costs go well beyond the mortgage payment. Property taxes vary from well under 1% of value a year in some states to more than 2% in others. Homeowners insurance has risen sharply in many regions with storm and wildfire exposure. Maintenance is often budgeted at 1% to 2% of the home's value per year, and condos and planned communities add HOA dues. Utilities are frequently higher in a house than in an apartment.

In return, owners build equity. Each mortgage payment reduces the loan balance, and over time the home usually appreciates. Nationally, U.S. home prices have risen roughly 3% to 5% a year over long periods, though with deep regional differences and occasional sharp declines, as in 2007 to 2011. Leverage magnifies both outcomes: a 5% price gain on a home bought with 20% down is a 25% gain on the cash invested, and a 5% drop is a 25% loss.

Taxes can help, but less than many expect. Mortgage interest and property taxes are deductible only if you itemize, and with today's higher standard deduction most homeowners no longer do. The calculator applies the 2026 standard deduction for your filing status and counts only the tax benefit above it.

Selling costs are the other large expense. Agent commissions, transfer taxes, closing fees and preparing the home for sale commonly total 6% to 10% of the sale price. Paying these after only a year or two is the main reason buying rarely makes sense for a short stay.

Finally, ownership offers stability and control. Nobody can decline to renew your lease, you can renovate as you like, and a fixed-rate mortgage locks in the largest part of your housing cost even as rents rise around you.

What to Know When Renting

Renting has low upfront costs: typically the first month's rent, a security deposit and perhaps an application or broker fee. The landlord pays for property taxes, building insurance and major repairs, and tenants only need inexpensive renter's insurance to cover their belongings and liability.

The main advantages are flexibility and predictability. Moving for a new job or a change in family life costs little more than the moving truck, and there are no surprise bills for a new roof or furnace. The cash that would otherwise go into a down payment can stay invested in a diversified portfolio and remain easy to reach.

The trade-offs are rising rent and less control. Rents generally increase each year at renewal, renters build no equity, and the landlord can sell the property or decline to renew. Rules about pets, decorating and alterations are set by the lease. Renting works best financially when the renter actually invests the money saved; spending it erases most of the advantage the calculator shows.

Should I Consider Buying or Renting?

Start with how long you expect to stay. With the default inputs, buying a $500,000 home becomes cheaper than paying $3,000 a month in rent only after about six years. Anyone likely to move sooner is usually better off renting, regardless of how attractive owning seems.

Compare the price-to-rent ratio. Dividing the home price by a year's rent for a similar property gives a quick read on a local market. A ratio below about 15 tends to favor buying, while a ratio above roughly 20 often favors renting. The default inputs give a ratio of about 14, which helps explain why buying wins for longer stays.

Consider mortgage rates and your down payment. Higher rates raise the cost of owning without changing rent, pushing the break-even point further out. A larger down payment lowers interest costs but ties up more money that could otherwise be invested.

Think about appreciation realistically. Home prices do not rise in a straight line, and some markets have been flat for a decade at a time. Try the calculator at 1% or 2% appreciation to see how sensitive the answer is. Do the same with rent growth, which has historically tracked inflation fairly closely.

Account for the opportunity cost of your cash. Money spent on a down payment, closing costs and repairs could instead earn investment returns. The calculator compounds every dollar of housing cost at your after-tax investment return, so a higher assumed return makes renting look better and a lower one favors buying.

Look at your whole financial picture. Buying is safer with an emergency fund that survives the down payment and closing, steady income, good credit and manageable debt. Stretching to buy with no cash cushion can turn an unexpected repair or job loss into a crisis.

Don't forget non-financial reasons. Schools, neighborhood, space for a growing family, the freedom to renovate or the simplicity of calling a landlord when something breaks can outweigh a few thousand dollars either way. The calculator measures money; the decision also involves how you want to live.

Revisit the decision periodically. Rates, rents and prices change, and so do personal circumstances. Running the numbers again every year or two, or whenever you are offered a lease renewal with a large increase, keeps the comparison current.

Net cost of buying = FV(down payment + closing) + FV(payments, tax, insurance, upkeep) − FV(tax savings) − (sale price − selling costs − loan balance)

FV

value at the end of the stay if the money had been invested at the after-tax return instead

tax savings

marginal tax rate × (mortgage interest + property tax − standard deduction), when positive

Renting cost is the future value of rent, renter's insurance and upfront fees plus the earnings lost on the security deposit. Dividing each total by the years stayed gives the average annual cost shown in the table.

Frequently asked questions

Sources

• IRS – Standard deduction
• IRS Publication 936 – Home Mortgage Interest Deduction
• Consumer Financial Protection Bureau – Owning a Home