Rent vs buy calculator

How to compare renting and buying

Renting and buying are not just a monthly-payment comparison - buying builds equity but carries large one-time costs, while renting is flexible but builds nothing. This calculator estimates the total net cost of each over the years you plan to stay, so you can compare apples to apples.

What the model includes

• Owning: down payment + mortgage payments + property tax + maintenance, minus the equity you recover when you sell (home value grown by appreciation, less the remaining loan and ~6% selling costs).
• Renting: total rent paid, growing each year.

Worked example

A $500,000 home, 20% down, 6.5% mortgage, staying 7 years, with 2.2% a year for tax and maintenance, 3% home appreciation, versus $2,500 rent growing 3% a year:

• Monthly mortgage: about $2,528
• Net cost of buying (after recovering equity at sale): about $180,286
• Total rent paid: about $229,874
• Result: buying is cheaper by about $49,588 over the 7 years

Shorten the stay or lower appreciation and the answer can flip to renting.

What moves the answer

• Time horizon. Longer stays favor buying; short stays favor renting because of the up-front and selling costs.
• Price-to-rent ratio. Expensive homes relative to rents favor renting.
• Appreciation and rates. Higher appreciation and lower mortgage rates favor buying.

The caveats

This is a simplified estimate. It does not model the opportunity cost of investing your down payment if you rent, nor mortgage-interest or property-tax deductions. Both can shift the result, so use this as a starting point and run your own numbers for a close call.

Common mistakes

• Comparing only the monthly payment versus rent, ignoring equity and costs.
• Assuming buying always wins - for short stays it often does not.
• Forgetting selling costs, which take a big bite out of equity.

To check whether refinancing later would help, see the refinance break-even calculator; to weigh extra payments versus investing, see the mortgage payoff vs invest calculator.