Rent vs. Buy Calculator

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Compare the true cost of renting versus buying a home over time.

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Short (1–5 yr): breakeven analysis · Long (20–30 yr): lifetime comparison
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Limits annual tax increase
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Transaction Costs
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Appraisal + title + attorney + origination
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Agent commission when you sell
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Required if down payment < 20%
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About This Tool

This calculator provides a comprehensive financial comparison between renting and buying a home over your chosen time horizon, helping you make one of the most significant financial decisions you will ever face. Rather than simply comparing monthly rent to a mortgage payment, it accounts for the full spectrum of costs on both sides: mortgage principal and interest, property taxes, homeowner's insurance, maintenance and repairs, closing and selling costs, home appreciation, equity buildup, tax benefits from mortgage interest deductions, and the opportunity cost of investing your down payment elsewhere. The analysis uses month-by-month modeling to track how each cost evolves over time. Rent increases annually based on your specified inflation rate, while the buying scenario factors in property tax growth, insurance increases, and home value appreciation. The calculator computes the net cost of each option by accounting for the equity you build as a homeowner versus the investment returns you could earn by investing the difference between renting and buying costs. This approach follows the same methodology used by financial planners and academic researchers studying housing economics. This tool is invaluable for renters considering homeownership, homeowners contemplating whether to sell and rent, couples planning a move to a new city, and financial advisors guiding clients through housing decisions. It reveals surprising insights — such as how closing and selling costs can make buying disadvantageous for short time horizons, or how high appreciation rates can tilt the equation heavily toward buying. All calculations run entirely in your browser with no data sent to any server, so your sensitive financial details remain completely private. Adjust any assumption instantly to see how changes in interest rates, home prices, or your timeline affect the outcome.

Sources: CFPB Homebuying Guide · PWL Capital — 5% Rule

Understanding the Rent vs. Buy Decision

The rent vs. buy decision is one of the largest financial choices most people face. A common mistake is comparing your monthly mortgage payment to your monthly rent — but that ignores many hidden costs of ownership. The true cost of owning a home includes mortgage payments, property taxes (averaging about 1% of home value nationally), homeowner's insurance, maintenance and repairs (Fannie Mae recommends budgeting 1% of home value annually for newer homes, up to 4% for older homes), closing costs (typically 2–5% of the purchase price, per the CFPB), and selling costs (typically 5–6% in real estate commissions). A useful screening tool is the price-to-rent ratio: divide the home price by the annual rent for a comparable property. According to Trulia's Rent vs. Buy Index, a ratio below 15 generally favors buying, 16–20 is a transition zone, and above 21 favors renting. Another framework is the 5% rule: multiply the home's value by 5% and divide by 12. This estimates the monthly unrecoverable cost of owning — roughly 1% for property taxes, 1% for maintenance, and 3% for cost of capital. If comparable rent is below that figure, renting may be the better financial choice. Time horizon is critical. Buying involves substantial upfront costs (closing) and back-end costs (selling commissions). U.S. home prices have appreciated about 3–4% annually over the long term according to FHFA data, but you generally need to stay at least 5–7 years to recoup transaction costs.

How to Use

  1. Enter your home price, down payment, mortgage rate, and monthly rent for comparison.
  2. Adjust property taxes, insurance, maintenance costs, and your time horizon in years.
  3. View the cost comparison chart, break-even point, and see which option saves you more money.

Methodology

For each year of your time horizon, the calculator computes cumulative costs for both scenarios. Buying costs include mortgage principal and interest (standard amortization formula), property taxes with optional annual cap (e.g., Prop 13), homeowner's insurance with annual escalation, maintenance, PMI when down payment is below 20%, closing costs, and selling costs. It credits equity built through principal payments and home appreciation, plus mortgage interest tax deductions compared against the standard deduction — so tax savings only count the benefit above what you would deduct anyway (per IRS Publication 936). Renting costs include monthly rent adjusted for annual increases, plus renter's insurance. If renting costs less each month, the renter invests the monthly surplus at the specified investment return rate, compounding annually. The renter also invests the full down payment amount. If buying costs less monthly, the buyer invests that surplus instead. The 5% Rule quick check (Ben Felix / PWL Capital) estimates breakeven rent as home value times 5% divided by 12 — roughly 1% property tax, 1% maintenance, and 3% opportunity cost of capital. All values can be viewed in nominal or inflation-adjusted (real) terms. The break-even year is where the two net cost curves cross.

Sources: IRS Publication 936 · CFPB Closing Costs · FHFA House Price Index

Understanding Your Results

The break-even year is when cumulative buying costs fall below cumulative renting costs. Before that point, renting is cheaper; after it, buying wins. Key sensitivities to watch: higher home appreciation rates and higher rent increases both favor buying. Higher investment returns favor renting because your down payment grows faster in the market. A larger down payment increases your opportunity cost but eliminates PMI. If no break-even occurs within your time horizon, buying remains more expensive for your scenario. Consider extending the horizon or adjusting assumptions if you are close to break-even. Remember that homeownership also provides non-financial benefits like stability and forced savings through equity building.

Practical Examples

Example 1: $400,000 home with 20% down ($80,000), 6.5% mortgage rate, 30-year term. Monthly rent alternative: $2,000. With property taxes at 1.1%, insurance at $150/month, and 3% appreciation, buying typically breaks even around year 6. The $80,000 down payment could have earned about $56,000 at 7% returns over that period — a real cost factored into the calculation. Example 2: Same home, but only 5% down ($20,000). PMI adds roughly $200/month until equity reaches 20%. The lower opportunity cost of a smaller down payment partially offsets the PMI expense, but monthly payments are higher. Break-even shifts to around year 7. Example 3: High-rent market. $600,000 home, monthly rent $3,500. The price-to-rent ratio is $600,000 / ($3,500 x 12) = 14.3, which falls in the buy-favored zone. With 4% appreciation, buying breaks even around year 4. These examples use simplified assumptions. Your actual results depend on local property taxes, insurance costs, HOA fees, and market conditions.

Tips for the Rent vs. Buy Decision

Compare total costs, not just monthly payments. Your mortgage payment is only one piece — add property taxes, insurance, maintenance, and HOA fees to get the true monthly cost of owning. Plan for transaction costs. Closing costs (2–5% of purchase price) and selling costs (5–6% commission) mean you need to stay several years just to break even on the deal itself. Consider your time horizon honestly. If there is a reasonable chance you will move within 3–5 years, renting is often the safer financial choice. Factor in opportunity cost. Your down payment could be invested elsewhere. At historical stock market returns of about 7–10% annually, the opportunity cost of a large down payment is significant. Budget for maintenance. Fannie Mae recommends 1% of home value per year for newer homes, increasing for older properties. This is a cost renters do not pay. Check local property tax rates. They vary widely — from under 0.5% in some states to over 2% in others — and dramatically affect the buy vs. rent math.

Sources: Fannie Mae Maintenance Guide

Sources

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Frequently Asked Questions
How does the calculator work?
The calculator compares the total cost of renting versus buying over your chosen time period. For buying, it factors in mortgage payments, property taxes, insurance, maintenance, closing costs, and opportunity cost of your down payment—but credits you for equity built and potential tax benefits. For renting, it calculates cumulative rent plus renter's insurance, adjusted for annual increases. The result shows which option costs less overall and when buying breaks even.
What is the property tax cap option?
Some states like California (Proposition 13) limit how much property taxes can increase annually, regardless of home value appreciation. With a 2% cap, even if your home value rises 5% per year, your property tax assessment only increases 2% annually. This significantly reduces long-term buying costs in capped states. Enable this option and enter your local cap rate if applicable — it makes buying more attractive over longer time horizons. This option is only shown for countries where it applies.
What is opportunity cost?
Opportunity cost is what you could earn by investing your down payment instead of locking it in home equity. If you put $80,000 down on a house, that money can't be invested in stocks or bonds. At a 7% return, that $80,000 could grow to $112,000 in 5 years. The calculator factors this in—buying ties up capital that could otherwise grow, which is a real cost even though you don't write a check for it.
What costs does the calculator include for buying?
The calculator includes: mortgage principal and interest, property taxes (with optional annual cap), homeowner's insurance, HOA fees if applicable, maintenance costs (typically 1% of home value annually), closing costs (typically 2-5% upfront), and opportunity cost of your down payment. It credits you for equity built through principal payments and home appreciation, plus potential mortgage interest tax deduction based on your marginal rate.
What is the break-even point?
The break-even point is when the total cost of buying equals the total cost of renting. Before this point, renting is cheaper; after it, buying becomes the better deal. The chart shows this as the point where the lines cross. The longer you stay, the more likely buying pays off—but if you move before break-even, you may lose money on buying costs and transaction fees.
How do I use the interactive chart?
Hover over or touch the chart to see costs at any point in time. The crosshairs follow your cursor showing the exact rent and buy costs at that year. The orange marker shows the break-even point where buying becomes cheaper. The chart starts positioned at break-even, and returns there when you stop hovering—making it easy to compare any year against the tipping point.
Can I change the currency?
Yes! Use the currency dropdown to select from 20+ currencies including USD, EUR, GBP, JPY, and more. The calculator automatically detects your location and suggests the appropriate currency, but you can change it anytime. All displayed values will update to use your selected currency symbol and formatting.
How do I share my results?
After calculating, you can share your results in two ways: copy a link that includes all your inputs (the recipient will see your exact scenario), or copy a text summary with the key findings. The link preserves all settings including home price, rates, and time horizon—perfect for discussing with a partner, financial advisor, or real estate agent.
What is PMI and when does it apply?
PMI (Private Mortgage Insurance) is required by most lenders when your down payment is less than 20%. It protects the lender if you default. PMI typically costs 0.5-1% of the loan amount annually and is added to your monthly payment. The good news: PMI automatically drops off once your loan balance reaches 80% of the original home value. The calculator includes PMI in the buying costs when applicable.
What costs are NOT included in the calculator?
The calculator focuses on the major financial factors but doesn't include: moving costs (hiring movers, truck rental), furniture and appliances for a new home, utility connection/transfer fees, home warranty costs, or potential capital gains taxes when selling (though most primary residences are exempt up to $250K single/$500K married). These costs affect both renters and buyers to varying degrees, so consider them separately based on your situation.
What is the 5% Rule for rent vs. buy?
The 5% Rule, popularized by financial analyst Ben Felix of PWL Capital, provides a quick way to estimate whether renting or buying is cheaper. Multiply the home's value by 5% and divide by 12 to get a monthly breakeven rent. If your actual rent is below this amount, renting is likely the better financial choice. The 5% breaks down roughly as: 1% for property taxes, 1% for maintenance costs, and 3% for the opportunity cost of having your equity tied up in the home rather than invested. For a $500,000 home, the breakeven rent would be about $2,083 per month. This is a screening tool — the full calculator provides a more detailed year-by-year analysis.
Why does the standard deduction matter for homebuyers?
Many calculators overstate the tax benefit of homeownership by assuming you can deduct all your mortgage interest and property taxes. In reality, you only benefit from itemizing if your total deductions exceed the standard deduction — $14,600 for single filers or $29,200 for married filing jointly (2024 values per the IRS). For example, if you pay $18,000 in mortgage interest and $5,000 in property taxes, your itemized deductions total $23,000. As a single filer, you only save taxes on the $8,400 above your $14,600 standard deduction — not the full $23,000. This calculator accounts for this by comparing your itemized deductions against the standard deduction, giving you a more accurate picture of the true tax benefit of buying.
Should I invest my down payment instead of buying a home?
This is the core opportunity cost question. If you invest $100,000 in a diversified stock portfolio instead of using it as a down payment, historical S&P 500 returns suggest it could grow at roughly 7% per year after inflation (about 10% nominal). After 10 years, that $100,000 could become roughly $197,000 in real terms. However, buying a home also builds equity — you are essentially investing in real estate while having a place to live. The calculator tracks both sides: it invests the down payment for the renter and credits the buyer for equity built. It also invests monthly savings for whichever option costs less each month, giving a complete picture of wealth accumulation for both scenarios. The answer depends on your specific numbers — home appreciation, investment returns, mortgage rate, and how long you plan to stay.
How does inflation affect the rent vs. buy decision?
Inflation generally favors homebuyers because a fixed-rate mortgage payment stays the same in nominal terms while rents typically rise 3–5% per year. Over 10 years, a $2,000 monthly rent at 3% annual increases becomes $2,688 — while the mortgage payment remains unchanged. However, inflation also erodes the real value of future costs and investment returns. This calculator lets you toggle between nominal and inflation-adjusted (real) views. In real terms, the fixed mortgage payment actually decreases in value over time — making buying look even better over long horizons. Historical US inflation has averaged about 2–3% annually over the long term. Use the inflation rate input to see how different inflation scenarios affect your comparison.
What are the hidden costs of homeownership most calculators miss?
Several significant costs are often overlooked when comparing renting to buying: Maintenance and repairs average 1–4% of home value annually according to Fannie Mae's guidelines — newer homes toward 1%, older homes up to 4%. On a $400,000 home, that is $4,000–$16,000 per year. Selling costs typically run 5–6% of the sale price in real estate commissions and fees. On a home that appreciated to $500,000, that is $25,000–$30,000 you lose when you sell. Insurance costs have been rising 5–10% annually in many states, significantly above general inflation. This calculator includes an insurance escalation rate to capture this trend. The standard deduction effect means many homeowners get little or no real tax benefit from their mortgage interest — especially after the 2017 Tax Cuts and Jobs Act nearly doubled the standard deduction. This calculator accounts for all of these factors, making it more comprehensive than tools that only compare mortgage payments to rent.
What is Eigenmietwert and how does it affect buying in Switzerland?
Eigenmietwert (imputed rental value) is a Swiss tax concept unique in the world. As a homeowner, you must declare a fictional rental income — typically 60–70% of the market rent your property could generate — as taxable income, even though you receive no actual rent. In return, you can deduct mortgage interest and maintenance costs from your taxes. This creates a distinctive dynamic: high mortgage debt can actually reduce your tax burden, since interest deductions may exceed the Eigenmietwert. This is why many Swiss homeowners intentionally maintain high mortgages rather than paying them off. Select Switzerland in the calculator and adjust the Eigenmietwert rate and your cantonal marginal tax rate to see how this affects your rent-vs-buy comparison.
How does buying a home in Australia differ from the US?
Australia has several key differences from the US property market. First, there is no mortgage interest tax deduction for owner-occupied homes — unlike the US, you cannot deduct home loan interest from your taxable income. Second, stamp duty (a state government transfer tax) typically adds 3–5% to your purchase price and varies significantly between states. Third, Australia does not have PMI (Private Mortgage Insurance) but does have LMI (Lenders Mortgage Insurance), which applies when your deposit is less than 20% of the property value. On the positive side, your primary residence is exempt from Capital Gains Tax when sold, and first home buyers in most states receive stamp duty concessions or grants.
How does UK Stamp Duty (SDLT) affect the calculation?
UK Stamp Duty Land Tax is graduated: 0% up to £125,000, 2% on £125,001–£250,000, 5% on £250,001–£925,000, 10% on £925,001–£1,500,000, and 12% above £1,500,000. First-time buyers pay 0% up to £300,000 and 5% on £300,001–£500,000. An additional 5% surcharge applies to second homes (increased from 3% in the Autumn 2024 Budget). The calculator uses an average closing cost percentage — for a precise SDLT figure, check HMRC's online calculator.