Rent vs. Buy Calculator

Enter your rent and home price — get a year-by-year comparison accounting for equity, opportunity cost, property taxes, and maintenance. See when buying wins.

How the Rent vs. Buy Decision Is Calculated

  • The true cost of owning goes beyond the mortgage payment — it includes property taxes, homeowners insurance, HOA fees, and maintenance (typically estimated at 1%–2% of home value per year).
  • The true cost of renting must account for opportunity cost: the down payment and closing costs you'd invest instead could grow in the market. This investment return is subtracted from renting's apparent simplicity.
  • Most markets reach a rent-vs.-buy break-even around year 5–7. Before that point, renting is often cheaper when all costs are considered. After it, buying typically wins as equity accumulates and rent rises.

Calculation details

Methodology

The model accumulates flat monthly rent and compares it with down payment plus mortgage P&I, less modeled home equity. Mortgage balance is amortized monthly and property value grows at the entered annual appreciation rate divided into monthly increments. Break-even is the first modeled month when net buying cost falls below cumulative rent.

Assumptions and limitations

  • The model excludes property tax, homeowners insurance, HOA dues, maintenance, closing and selling costs, and tax effects.
  • Rent remains flat and no investment return or opportunity cost is applied to renter savings or the down payment.
  • Appreciation is an uncertain user assumption and is compounded monthly.
  • The comparison is a simplified cash-outlay-minus-equity model, not a full net-present-value analysis.
  • Break-even is searched for up to 30 years and may not occur under the selected assumptions.

Worked example: five-year comparison

  • $500,000 home with 20% down
  • $400,000 mortgage at 6.5% for 30 years
  • 3% annual appreciation assumption
  • $2,500 monthly rent
  • Five-year horizon

The model produces about $150,000 cumulative rent, a home value near $580,809, a mortgage balance near $374,445, and about $206,364 in equity after five years.

Because major ownership and rental costs are omitted, this output is a directional comparison only. Add the missing local costs before making a housing decision.

Official sources

Frequently Asked Questions

Is it better to rent or buy a home right now?

It depends on your timeline, local market, and financial situation. Buying typically wins financially if you stay for 5+ years, home prices appreciate, and you have a stable income. Renting is better if you might relocate within 3 years, need flexibility, or live in a market where home prices are very high relative to rents (low price-to-rent ratio). Use this calculator to compare the true total costs in your specific situation.

What is the price-to-rent ratio?

The price-to-rent ratio compares median home prices to annual rents in a market. A ratio of 15 or less generally favors buying; 20 or above generally favors renting. For example, if a home costs $400,000 and comparable rentals cost $2,000/month ($24,000/year), the price-to-rent ratio is 16.7 — close to neutral. High-cost coastal cities often have ratios of 25–40, strongly favoring renting purely on price.

What are the hidden costs of homeownership?

Beyond the mortgage payment, owning a home includes property taxes (0.5%–2.5% of value annually), homeowners insurance ($1,000–$3,000/year), HOA fees if applicable, and maintenance — typically estimated at 1%–2% of home value per year. A $400,000 home could cost $4,000–$8,000 per year in maintenance alone. First-time buyers often underestimate these costs.

How to use this estimate

This calculator is an educational planning tool. Results are based on the figures and assumptions entered by the reader, use standard mortgage mathematics, and are not a loan offer, approval, or substitute for a lender's Loan Estimate. Taxes, insurance, fees, mortgage insurance, and available rates vary by borrower, property, lender, and location.

Review the assumptions, compare more than one scenario, and confirm the final numbers with a licensed mortgage professional before making a financial commitment.