Rent vs Buy Calculator

Should you rent or buy? Enter your local costs and see the breakeven year, total wealth comparison, and the true cost of homeownership vs renting over time.

Reference table

Annual Rent Increase	Breakeven Year	Recommendation	Buyer Net Wealth
0.5	Not in 15 years	Renting wins by $40,503 after 7 years	$187,624
1	Not in 15 years	Renting wins by $37,487 after 7 years	$187,624
1.5	Not in 15 years	Renting wins by $34,422 after 7 years	$187,624
2	Not in 15 years	Renting wins by $31,309 after 7 years	$187,624
2.5	Not in 15 years	Renting wins by $28,146 after 7 years	$187,624
3	Not in 15 years	Renting wins by $24,932 after 7 years	$187,624
4	Year 11	Renting wins by $18,352 after 7 years	$187,624
5	Year 9	Renting wins by $11,561 after 7 years	$187,624
6	Year 8	Renting wins by $4,554 after 7 years	$187,624
7	Year 7	Buying wins by $1,965 after 7 years	$187,624
8	Year 7	Buying wins by $7,276 after 7 years	$187,624
9	Year 6	Buying wins by $10,950 after 7 years	$187,624
10	Year 6	Buying wins by $14,612 after 7 years	$187,624

Key Insights

Buying beats renting only if you stay long enough to recoup transaction costs — typically 5-7 years
The down payment's opportunity cost is often overlooked — $80K invested at 7% grows to $158K in 10 years
Renting flexibility has real value: job changes, family needs, or market downturns won't trap you
In high-appreciation markets (Austin, Miami, Phoenix), buying often wins earlier — check local data

The Rent vs Buy Decision: What Really Matters

The rent vs buy decision is one of the biggest financial choices most people make. The conventional wisdom that 'renting is throwing money away' is an oversimplification — homeowners also 'throw away' money on mortgage interest (the majority of early payments), property taxes, insurance, maintenance, and transaction costs. The real question is: over your specific time horizon, does buying or renting leave you with more wealth?

How This Calculator Compares the Two Paths

The calculator runs two parallel scenarios. The buyer scenario computes monthly mortgage payments (P&I), adds property tax, insurance, HOA, and maintenance, subtracts mortgage interest tax deductions if applicable, and tracks how equity builds as the home appreciates. The renter scenario assumes the down payment and the monthly savings (rent vs. true cost of ownership) are invested at your expected investment return rate. At any year, you can compare the buyer's home equity minus selling costs against the renter's investment portfolio.

Hidden Costs Buyers Often Miss

Closing costs when buying (2-5%) and selling (6-8%) total 8-13% of home value — this alone adds years to breakeven
Maintenance: 1-2% of home value per year ($4,000-$8,000 on a $400K home) — renters pay $0 for repairs
Opportunity cost: the down payment invested in index funds at 7% doubles every 10 years
PMI: if down payment is under 20%, add $100-$300/month until you reach 20% equity (~7-9 years at typical rates)
Property taxes increase over time (reassessments) and are non-deductible above the $10K SALT cap for most buyers
Home appreciation is NOT guaranteed — prices fell 30-50% in some markets during 2007-2012

When Buying Usually Wins

You plan to stay 7+ years — transaction costs have time to be recouped through appreciation and equity
Your local price-to-rent ratio is below 20 (home price ÷ annual rent) — indicates buying is relatively affordable
You have a stable income and 20% down payment — avoids PMI and worst-case forced-selling scenarios
Local market has historically strong appreciation (coastal cities, growing metros)
You value stability, community, and the ability to customize your space
Interest rates are significantly lower than current rents (rare in 2024-2025 market)

Rent vs Buy Scenarios

Real-world comparison at different price points and time horizons

$400K Home — 7 Year Stay (Typical Suburban)

Buying: $80K down (20%), $320K mortgage at 6.8% → $2,087/mo P&I. Add taxes $400, insurance $125, maintenance $333 = $2,945/mo true cost
Renting: $2,000/mo rent, down payment $80K invested at 7% → grows to $128,600. Monthly savings of $945 invested → adds $92,000
After 7 years: Buyer equity ~$185K (appreciation + paydown) minus 6% selling costs $42K = $143K net. Renter portfolio: ~$221K

Renter wins by ~$78K at year 7. Breakeven: ~year 9. This is why staying long matters.

$900K Home — 5 Year Stay (High-Cost City)

Buying: $180K down, $720K mortgage at 6.8% → $4,696/mo P&I. Add taxes $825, insurance $208, HOA $400, maintenance $750 = $6,879/mo true cost
Renting $3,500/mo saves $3,379/mo vs buying. Down payment $180K + monthly savings invested at 7% → portfolio grows to $522K
After 5 years: Home at 4% appreciation = $1,096K. Equity after paydown = $382K, minus 6% selling costs $66K = $316K net

Renter wins by $206K at year 5. In high-cost cities, renting often wins unless staying 10+ years.

Frequently Asked Questions

Is it always better to buy than rent?

No — the 'rent is throwing money away' myth ignores that buyers also spend money on mortgage interest (most of each early payment), property taxes, insurance, maintenance, and transaction costs. Renting is financially superior when you'll move in under 5 years, when your local price-to-rent ratio is high, or when the stock market offers better returns than home appreciation in your market.

What is the price-to-rent ratio and how do I use it?

Price-to-rent ratio = home price ÷ annual rent. Below 15: buying is generally favorable. 15-20: neutral, depends on your timeline. Above 20: renting is often cheaper on a monthly basis. Many expensive cities (NYC, SF, LA) have ratios of 30-50+, making renting financially superior for most time horizons.

How many years do I need to stay for buying to make sense?

In most US markets in 2024-2025, you need to stay 5-8 years for buying to break even with renting, primarily because buying and selling transaction costs total 8-13% of the home's value. In markets with high appreciation (Miami, Austin) it can be less; in stagnant markets it can be 10+ years.

Should I count the down payment as an investment?

Yes — your down payment has an opportunity cost. $80,000 invested in a diversified stock portfolio at 7% annual return grows to about $158,000 in 10 years. This doesn't mean renting is always better, but it means home equity should be compared against what that capital would earn invested elsewhere.

Does the mortgage interest deduction make a big difference?

Less than it used to. The 2017 Tax Cuts and Jobs Act doubled the standard deduction, so fewer than 15% of households now itemize. The benefit only applies to the amount of interest that exceeds your standard deduction ($14,600 single / $29,200 married in 2024). For most middle-income buyers, the tax benefit is minimal.

What happens to my analysis if home prices drop?

Significant price drops dramatically extend the breakeven period or can make buying a net loss. During 2007-2012, some markets fell 30-50%. If you bought a $400K home with 20% down and prices fell 25%, you'd be underwater (owe more than the home is worth) and trapped — unable to sell without a loss. This risk is another argument for only buying if you can commit to 7+ years.