🏠Rent vs Buy Calculator
Should you rent or buy? Compare total costs, build equity, and see which option is best for your financial situation.
Why Use This Calculator?
Complete 5-Year Cost Comparison
$400k home, 20% down ($80k): Mortgage $2,023/month + $500 taxes + $150 insurance + $400 maintenance = $3,073/month buying. Rent $2,200/month rising 3%/year. Year 1: buying costs $1,273/month more ($15,276/year). Year 5: buying builds $52,800 equity + $48,800 appreciation = $101,600 net worth vs renting ($0). Calculator projects full 5-30 year timeline.
Factor All Hidden Homeownership Costs
Beyond mortgage ($2,023), homeowners pay: property tax $6,000/year ($500/month), insurance $1,800/year ($150/month), maintenance 1% home value ($333/month), HOA $200/month optional. Total: $2,023 + $1,183 hidden = $3,206 true housing cost vs $2,200 rent. Calculator reveals real monthly gap. Many buyers shocked by hidden $1,000-1,500/month costs.
Calculate Break-Even Timeline
$400k home, $80k down + $12k closing = $92k upfront. Build equity $7,200/year (principal) + $12k appreciation = $19,200/year wealth. $92k ÷ $19,200 = 4.8 year break-even. Selling at 3 years loses $15,600 vs staying 7 years gains $72,800 net. Calculator shows exact break-even month = decision clarity.
Model Investment Opportunity Cost
Rent $2,200/month vs buy $3,073/month = save $873/month renting. Invest $873 @ 8% for 10 years = $160,423. Home equity after 10 years: $87,632 principal + $120k appreciation = $207,632. Buying wins $47,209 but requires $92k down payment upfront. Calculator compares wealth accumulation paths accurately.
Account for Tax Deduction Benefits
$320k loan @ 6.5% = $20,372 interest year 1 + $6,000 property tax = $26,372 deductions. 24% tax bracket = $6,329 saved (if itemizing over $29,200 standard deduction). Effective mortgage payment: $3,073 - $527/month tax savings = $2,546 true cost. Earlier years = higher deductions. Calculator models tax benefit timeline.
Compare Rent Increases vs Fixed Mortgage
Rent $2,200 today, 3% annual increases = $2,266 year 2, $2,554 year 5, $3,227 year 10, $4,080 year 15. Mortgage fixed $2,023 forever (30-year). Year 1-3: rent cheaper. Year 4+: mortgage advantage grows. Year 15: save $2,057/month vs rent. Calculator shows crossover point where fixed payment wins.
Step-by-Step Guide
Determine Total Home Purchase Cost
$400k home: $80k down (20%) + $320k loan + $12k closing costs (3%) = $92k cash needed upfront. Closing costs include appraisal $500, inspection $400, title insurance $2,000, lender fees $3,200, recording fees $300, prepaid taxes/insurance $5,600. Always budget 23-25% of price total (20% down + 3-5% closing).
Example:
Example: $400k home = $80k down + $12k closing = $92k total cash to close
Calculate True Monthly Ownership Cost
$320k loan @ 6.5% = $2,023 P&I + $500 property tax (1.5% of $400k ÷ 12) + $150 insurance + $333 maintenance (1% of $400k ÷ 12) + $0-400 HOA = $3,006-3,406 total. Many budget only P&I ($2,023), shocked by extra $1,000+ monthly. Include all costs before comparing to rent.
Example:
Example: $2,023 mortgage + $983 hidden costs = $3,006 true monthly total
Project Current Rent with Annual Increases
$2,200 rent today, assume 3% annual increases (national average): Year 1 = $2,200, Year 2 = $2,266, Year 3 = $2,334, Year 5 = $2,554, Year 10 = $3,227, Year 15 = $4,080. Total 10 years rent: $282,438. Mortgage fixed $2,023 × 120 months = $242,760. Rent increases favor buying long-term.
Example:
Example: $2,200 @ 3% annual = $3,227/month year 10 (46.9% increase)
Calculate Equity Building Timeline
$320k loan @ 6.5%: Year 1 principal paid = $7,182 equity built. Year 5 = $41,419 cumulative. Year 10 = $87,632. Year 20 = $207,869. Front-loaded interest means slow equity start. Add home appreciation (3% avg): $400k home = $412k year 1, $463,710 year 5, $537,562 year 10. Total net worth = equity + appreciation.
Example:
Example: Year 5 = $41,419 paid + $63,710 appreciation = $105,129 total equity
Factor in Tax Deduction Savings
Itemized deductions (mortgage interest + property tax) vs standard deduction ($29,200 married 2024). Year 1: $20,372 interest + $6,000 tax = $26,372 (less than standard = no benefit). Year 1 with PMI: $26,372 + $2,700 PMI = $29,072 (still under). High-tax state (CA) + $15k state tax = $41,372 itemized (saves $2,925/year in 24% bracket).
Example:
Example: $26,372 itemized < $29,200 standard = $0 year 1 tax benefit
Calculate Renting + Investing Alternative
Buy costs $3,073/month vs rent $2,200 = $873/month savings by renting. Invest $873/month @ 8% return: Year 5 = $63,939, Year 10 = $160,423, Year 20 = $516,387. Compare to home equity year 20: $207,869 principal + $324,150 appreciation (3%/year) = $532,019. Buying beats investing by $15,632 after 20 years but required $92k down upfront.
Example:
Example: Invest $873/month @ 8% for 10 years = $160,423 portfolio value
Model Home Appreciation Scenarios
$400k home appreciation: Conservative 2% = $486,061 year 10 ($86k gain). Average 3% = $537,562 ($137k gain). Optimistic 5% = $651,558 ($251k gain). Appreciation varies by location: CA/NYC 4-6%, Midwest 2-3%. Hot markets can see 10%+ short-term but revert to 3-4% long-term mean. Conservative estimates = safer projections.
Example:
Example: $400k @ 3% annual appreciation = $537,562 value year 10
Account for Selling Costs When Exiting
Sell year 5: $463,710 value - $278,581 loan balance = $185,129 equity. Minus selling costs: realtor 6% ($27,823) + closing $3,000 + repairs $5,000 = $35,823 total. Net proceeds: $149,306. If sell year 3 ($424,652 value), equity $125,233 - $35,000 costs = $90,233 (only $5,766 gain on $92k invested). Early sale = big loss.
Example:
Example: Year 5 sale = $185,129 equity - $35,823 costs = $149,306 net
Calculate Break-Even Years to Own
$92k upfront (down + closing) + net $1,000/month extra (buy vs rent). Year 1: $92k + $12k = -$104k in hole. Year 3: -$128k + $40k equity + $24k appreciation = -$64k. Year 5: -$152k + $105k equity = -$47k. Year 7: -$176k + $177k equity = $1k break-even! Need 7 years to recover upfront costs.
Example:
Example: Break-even at year 7 when equity ($177k) exceeds costs ($176k)
Run Sensitivity Analysis on Variables
Test scenarios: (1) Rent increase 5% vs 3% = buying better. (2) Home appreciation 1% vs 3% = renting better. (3) Stay 3 years vs 10 years = renting wins short-term, buying wins long. (4) High HOA $500 vs $0 = renting more attractive. (5) Stock return 12% vs 8% = investing beats home. Model best/worst cases.
Example:
Example: 3-year stay + 2% appreciation = rent wins; 10-year + 4% = buy wins
Expert Tips & Strategies
Plan to Stay Minimum 5-7 Years Before Buying
$92k upfront, year 1 equity $7,182, year 3 = $22,618. Selling year 3 costs $35k (realtor + closing) = net loss $12,382 on $92k investment (-13.5% return). Year 7 equity $62,271, selling costs $40k = $22,271 profit (24.2% return). Break-even typically 5-7 years. Moving sooner = guaranteed loss. Match timeline to life stability.
Don't Forget Opportunity Cost of Down Payment
$80k down payment vs $80k invested @ 8% = $172,170 after 10 years ($92,170 gain). Home equity after 10 years: $87,632 principal + $137,562 appreciation = $225,194 (but includes $242,760 payments). True home return: $225,194 - $242,760 payments + $282,438 rent saved = $265,872 net. Buying wins but it's complex math - run calculator.
Renting Wins in Very High-Cost Cities (SF, NYC, LA)
$1.5M SF condo, 20% down = $300k. Mortgage $7,589 + $1,500 tax + $400 insurance + $800 HOA = $10,289/month. Identical condo rents $4,500/month. Price-to-rent ratio: $1.5M ÷ ($4,500 × 12) = 27.8 (over 20 = rent favored). Save $5,789/month renting, invest = better wealth. Sub-20 ratio = buy; over 20 = rent.
Buying Wins in Low-Cost, High-Growth Areas
Austin $350k home: $1,770 mortgage + $400 tax + $120 insurance + $290 maintenance = $2,580 total. Rent $2,300/month rising 5%/year (hot market). Year 5 rent = $2,933 (exceeds buy cost). Austin appreciated 8% annually 2015-2022 = $350k → $514,263 in 5 years ($164k gain). Low rent-to-price + high appreciation = buying slam dunk.
Run Calculator With 3 Appreciation Scenarios
Conservative 2% (recession/stagnant market), Average 3% (historical norm), Optimistic 5% (hot market). $400k home year 10: 2% = $486k, 3% = $538k, 5% = $652k. Difference: $166k swing. If buying only works at 5% appreciation, too risky. If works at 2%, safe bet. Always verify decision at conservative assumption first.
Calculate Whether You'll Actually Itemize Deductions
Standard deduction $29,200 (married 2024). Mortgage interest $20,372 + property tax $6,000 = $26,372 (below standard = no benefit). Need $29,200+ to itemize: High state tax state (CA $10k limit + $26k = $36k = itemize) or large mortgage (jumbo $600k = $39k interest + $6k tax = $45k = itemize). Most homeowners don't benefit anymore post-2017 tax reform.
Factor Job Security and Income Stability
Stable government job, 10 years tenure = low risk, buying safe. Startup employee, 1 year tenure, volatile industry = high risk, renting safer. Can't sell home in 2 weeks if laid off. Mortgage + no income = foreclosure. Rent + no income = move to cheaper place. Buying requires 6-12 month emergency fund minimum. Low job security = rent advantage.
Don't Buy Just Because "Rent is Throwing Money Away"
$2,200 rent vs $3,073 buy total cost. Rent "wastes" $2,200/month, but buying "wastes" $1,703 interest + $500 tax + $150 insurance + $333 maintenance = $2,686/month (only $387 builds equity). Year 1: Rent wastes $26,400, buying wastes $32,239 - $7,182 equity = $25,057 (rent slightly worse). Buying advantage minimal early years.
Common Mistakes to Avoid
✓ Better approach: $2,200 rent vs $2,023 mortgage looks like buying saves $177/month. But forgot $500 tax + $150 insurance + $333 maintenance = $3,006 true cost. Buying actually costs $806/month MORE. Then add $12k closing costs, $6k repairs, selling costs. Must include all ownership costs, not just P&I payment. Run full calculator to see real comparison.
✓ Better approach: $92k to close, year 2 equity $14,548. Sell year 2: $412k value - $306,452 balance = $105,548 equity - $27,500 selling costs = $78,048 net. Lost $13,952 on $92k (-15.2%). Should have rented. Year 5 = $149k net (62% gain). Year 7+ = buying profitable. Moving <5 years almost always loses money vs renting.
✓ Better approach: Compared year 1: $2,200 rent vs $3,073 buy, chose renting (saves $873/month). But year 5 rent $2,554, year 10 $3,227, year 15 $4,080. By year 8, rent ($2,983) exceeds buying ($3,073). Years 8-30 lose $200k+ extra in rent vs fixed mortgage. Short-term rent cheaper, long-term buying wins. Used 1-year snapshot instead of 10-year projection.
✓ Better approach: Budgeted $2,023 mortgage + $500 tax + $150 insurance = $2,673. Forgot 1% annual maintenance ($4,000/year = $333/month). Year 2: New roof $12,000. Year 4: HVAC $6,000. Year 7: Water heater $1,500. Real average: 1-2% home value annually in repairs. $400k home = $4k-8k/year ($333-667/month). Under-budgeting = credit card debt spiral.
✓ Better approach: Used 8% appreciation, $400k home becomes $863,568 in 10 years ($463k gain). Based buying decision on this. Reality: 3% historical average = $537,562 ($137k gain, $326k less). 8% unsustainable long-term (2020-2022 anomaly). Break-even at 8% year 4, at 3% year 7. Decision fails at realistic appreciation. Always use conservative 2-3% in calculator.
✓ Better approach: Condo $350k, mortgage $1,770 + tax $350 + insurance $100 = $2,220 vs $2,000 rent (buying wins!). Forgot $400/month HOA = $2,620 total (rent wins). Over 10 years: $400 × 120 = $48,000 in HOA fees. Special assessments: elevator $15k, roof $12k. HOA can increase 5-10%/year (no control). Always factor HOA into buy cost.
✓ Better approach: Bought $300k home in declining Rust Belt city. Projected 3% appreciation (calculator shows year 10 equity $177k). Reality: -1% annual = $271,513 value, $237k balance = $34k equity - $20k selling costs = $14k net (lost $78k from down payment + costs). Research local market trends: population decline, job loss, crime increase = appreciation risk. Calculator assumes stable market.
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Frequently Asked Questions
Is it better to rent or buy a home?
It depends on your situation. Buying is often better if you plan to stay 5+ years, have stable income, and can afford a down payment. Buying builds equity and offers tax benefits, but comes with maintenance costs and less flexibility. Renting is better for short-term stays, uncertain locations, or if you can't afford to buy. Consider the rent-to-price ratio: if annual rent is less than 5% of home price, buying may be better; if over 7%, renting may be smarter.
How long should I plan to stay to make buying worth it?
Generally, you should plan to stay at least 5-7 years to make buying worthwhile. It typically takes this long to recoup closing costs and build enough equity to offset selling costs. If you might move in 2-3 years, renting is usually better. The break-even point depends on your local market, home prices, and rent levels.
What hidden costs of homeownership should I consider?
Beyond mortgage payments, homeowners pay property taxes (1-2% of home value annually), homeowner's insurance ($1,000-3,000/year), HOA fees ($200-400/month in many communities), maintenance and repairs (1-2% of home value annually), and selling costs (6-10% when you sell). These can add $500-1,500+ to your monthly housing costs. Also budget for closing costs (2-5% of purchase price) upfront.
Should I invest instead of buying a home?
This depends on market conditions and personal goals. Historically, the stock market has returned about 10% annually vs. 3-4% for home appreciation. However, a home provides leverage (you control a $400K asset with an $80K down payment), forced savings, tax benefits, and a place to live. Many financial advisors recommend doing both: buy a modest home and invest in retirement accounts. Don't forget emotional factors like stability and pride of ownership.
What's a good rent-to-price ratio?
The rent-to-price ratio compares annual rent to home prices. Divide annual rent by home price: if the ratio is 5% or less, buying is often better; if 7% or more, renting may be smarter; 5-7% is a gray area. For example, if homes cost $400K and rent is $2,000/month ($24K/year), the ratio is 6% - borderline. This ratio varies by location: expensive cities like San Francisco (2-3%) favor renting, while affordable cities (7-8%) favor buying.
Financial Disclaimer
This calculator is provided for educational and informational purposes only. The results are estimates based on the information you provide and should not be considered as financial, legal, or tax advice.
Actual results may vary based on your specific circumstances, market conditions, and other factors. Always consult with qualified financial, legal, and tax professionals before making any financial decisions.
We make no guarantees about the accuracy, completeness, or reliability of the calculations. Use this tool at your own risk.