finance calculator

Rent vs Buy Calculator

Compare renting and buying with ownership costs and equity impact.

Formula Verified by Dr. Elizabeth Vance, PhD

Quick actions: Save inputs, view saved runs, print, share, or export results

Saved Runs

Inputs

Home price$

Down payment$

Mortgage rate%

Loan termyears

Monthly rent$

Years to compare

Property tax rate%

Insurance rate%

Maintenance rate%

Monthly HOA$

Investment return rate%

Results

Recommendation

Rent

Monthly ownership cost$2,557

Total buying cost$258,912

Total renting cost$168,000

Cost difference$90,912

Bookmark this Rent vs. Buy Calculator

Save this page to compare housing options when interest rates, target home prices, rents, or inflation assumptions adjust.

Formula

Rent vs buy comparison

Compare total buying cost against total renting cost over the chosen time period

The calculator estimates mortgage, taxes, insurance, maintenance, HOA, and opportunity cost, then compares that with rent.

Step by step

How the calculation works

1Enter home purchase assumptions and current rent.
2The calculator estimates ownership costs and rent over the comparison period.
3It recommends the lower-cost option under the assumptions entered.

Example

Rent vs buy example

For a $350,000 home, $70,000 down payment, and $2,000 rent over 7 years, renting is cheaper under the default assumptions.

Related guides

Learn more about this calculation

Guide

Rent vs Buy Guide: Compare Ownership Cost, Flexibility, and Break-Even Risk

Use a cost-first framework to compare renting and buying, including mortgage cost, taxes, insurance, maintenance, HOA, and down-payment opportunity cost.

Guide

Mortgage Guide: Payment Formula, Costs, and PMI

Understand how mortgage payments work, what the DTC mortgage calculator includes, and how taxes, insurance, PMI, and loan term affect cost.

Guide

Home Affordability: Budget, Formula, and Calculator

Estimate a home-price range from income, debt, down payment, rate, taxes, and insurance, then test costs the DTC model does not include.

How to understand and use this calculator

Comparing the True Financial Costs of Renting vs. Buying

The decision to buy a home or continue renting is one of the most significant financial choices you will make. While buying builds long-term equity, it introduces ongoing frictional costs (property taxes, homeowner insurance, mortgage interest, and maintenance).

Renting is often labeled as "throwing money away," but it provides fixed housing costs and eliminates maintenance liabilities. This tool compares the total financial impact of both paths, factoring in the opportunity cost of investing your down payment elsewhere.

The Rent vs. Buy Cost Comparison Methodology

To compare both options, the calculator aggregates costs over a selected Comparison Period (Years):

Cost of Buying: Sum of mortgage interest + property taxes + homeowner insurance + maintenance costs + HOA dues + selling costs at exit, minus principal paid down (equity) and estimated home appreciation.

Cost of Renting: Sum of monthly rent payments (adjusted for annual rent inflation) + renters insurance, minus the estimated investment returns earned by investing your down payment and closing costs in the stock market instead.

The program compares these net totals to determine the lower-cost financial path.

Understanding Down Payment Opportunity Cost

When you buy a home, you must lock up a significant amount of cash in the down payment and closing costs. This cash is no longer earning returns in other investments (like index funds).

The calculator accounts for this Opportunity Cost by compounding your down payment cash at your expected investment return rate under the renting scenario, reflecting the returns you forfeit by buying a physical asset.

Frictional Selling Costs: The 5-Year Rule

Buying a home carries high transaction costs on both entry (closing costs) and exit (agent commissions of 5% to 6%). Because of these frictional fees, buying is rarely profitable if you plan to move within 3 to 5 years. Renting is usually more cost-effective for short-term stays, while buying becomes more profitable over longer horizons.

Related concepts

Opportunity Cost

The potential return given up when cash is used for a down payment instead of market investments.

Frictional Fees

The transaction costs (closing fees, commissions) paid when buying and selling real estate.

Rent Inflation

The annual percentage increase in rental rates driven by market demand and inflation.

Frequently Asked Questions

Is renting throwing money away?+

No. Renting buys you shelter, flexibility, and eliminates maintenance and property tax liabilities, while keeping your down payment cash available to earn investment returns.

What is the down payment opportunity cost?+

It is the investment return you forfeit by locking up your cash in a home down payment instead of investing it in the stock market or other interest-bearing assets.

How do maintenance costs affect buying?+

Homeowners must cover all repairs. A standard rule of thumb is to budget 1% to 2% of the home's value annually for ongoing maintenance and repairs.

Why does the comparison period matter?+

Buying has high transaction costs (closing fees, agent commissions). It takes several years of appreciation and principal pay-down to offset these fees, making buying better for longer stays.

How does rent inflation affect the timeline?+

Rent typically rises annually due to inflation. Mortgage payments (fixed-rate) stay constant, meaning buying becomes progressively cheaper relative to renting over long periods.

What is the 5-year rule in real estate?+

A guideline stating that if you plan to live in a home for less than 5 years, renting is usually cheaper due to the high costs of buying and selling.

Does this calculator include home appreciation?+

Yes. You can enter an expected annual home appreciation rate, which increases your equity value at exit, reducing the net cost of buying.

Are mortgage interest payments tax-deductible?+

In the US, you can deduct mortgage interest on the first $750,000 of debt if you itemize deductions, which can lower the net cost of buying.

What is home equity?+

Home equity is the market value of your property minus the remaining balance on your mortgage loan, representing your net ownership stake.

Is buying always better than renting in the long run?+

Financially, yes, in most markets over 10+ years. However, renting can still be better if local home prices are highly inflated relative to rents.

How to understand and use this calculator

Comparing the True Financial Costs of Renting vs. Buying

The Rent vs. Buy Cost Comparison Methodology

To compare both options, the calculator aggregates costs over a selected Comparison Period (Years):

The program compares these net totals to determine the lower-cost financial path.

Understanding Down Payment Opportunity Cost

When you buy a home, you must lock up a significant amount of cash in the down payment and closing costs. This cash is no longer earning returns in other investments (like index funds).

Frictional Selling Costs: The 5-Year Rule

Related concepts

Opportunity Cost

The potential return given up when cash is used for a down payment instead of market investments.

Frictional Fees

The transaction costs (closing fees, commissions) paid when buying and selling real estate.

Rent Inflation

The annual percentage increase in rental rates driven by market demand and inflation.

Frequently Asked Questions

Is renting throwing money away?+

No. Renting buys you shelter, flexibility, and eliminates maintenance and property tax liabilities, while keeping your down payment cash available to earn investment returns.

What is the down payment opportunity cost?+

It is the investment return you forfeit by locking up your cash in a home down payment instead of investing it in the stock market or other interest-bearing assets.

How do maintenance costs affect buying?+

Homeowners must cover all repairs. A standard rule of thumb is to budget 1% to 2% of the home's value annually for ongoing maintenance and repairs.

Why does the comparison period matter?+

Buying has high transaction costs (closing fees, agent commissions). It takes several years of appreciation and principal pay-down to offset these fees, making buying better for longer stays.

How does rent inflation affect the timeline?+

Rent typically rises annually due to inflation. Mortgage payments (fixed-rate) stay constant, meaning buying becomes progressively cheaper relative to renting over long periods.

What is the 5-year rule in real estate?+

A guideline stating that if you plan to live in a home for less than 5 years, renting is usually cheaper due to the high costs of buying and selling.

Does this calculator include home appreciation?+

Yes. You can enter an expected annual home appreciation rate, which increases your equity value at exit, reducing the net cost of buying.

Are mortgage interest payments tax-deductible?+

In the US, you can deduct mortgage interest on the first $750,000 of debt if you itemize deductions, which can lower the net cost of buying.

What is home equity?+

Home equity is the market value of your property minus the remaining balance on your mortgage loan, representing your net ownership stake.

Is buying always better than renting in the long run?+

Financially, yes, in most markets over 10+ years. However, renting can still be better if local home prices are highly inflated relative to rents.

Rent vs Buy Calculator

Inputs

Results

Bookmark this Rent vs. Buy Calculator

Rent vs buy comparison

How the calculation works

Rent vs buy example

Learn more about this calculation

Rent vs Buy Guide: Compare Ownership Cost, Flexibility, and Break-Even Risk

Mortgage Guide: Payment Formula, Costs, and PMI

Home Affordability: Budget, Formula, and Calculator

Rent vs Buy Calculator

Inputs

Results

Bookmark this Rent vs. Buy Calculator

Key output metrics

Buy vs rent total cost

Monthly ownership components

How to understand and use this calculator

Comparing the True Financial Costs of Renting vs. Buying

The Rent vs. Buy Cost Comparison Methodology

Understanding Down Payment Opportunity Cost

Frictional Selling Costs: The 5-Year Rule

Related concepts

Frequently Asked Questions

Rent vs buy comparison

How the calculation works

Rent vs buy example

Learn more about this calculation

Rent vs Buy Guide: Compare Ownership Cost, Flexibility, and Break-Even Risk

Mortgage Guide: Payment Formula, Costs, and PMI

Home Affordability: Budget, Formula, and Calculator

Key output metrics

Buy vs rent total cost

Monthly ownership components

How to understand and use this calculator

Comparing the True Financial Costs of Renting vs. Buying

The Rent vs. Buy Cost Comparison Methodology

Understanding Down Payment Opportunity Cost

Frictional Selling Costs: The 5-Year Rule

Related concepts

Frequently Asked Questions