Rent vs Buy Calculator

Both paths start with the same cash: the down payment. A buyer turns it into home equity; a renter invests it and adds or withdraws the monthly difference between what owning and renting would cost, then compares the ending position to what was paid out.

• Net cost of buying = down payment + total ownership cash cost − (home value − remaining loan balance − selling costs)
• Net cost of renting = down payment + total ownership cash cost − ending invested portfolio
• The invested portfolio starts at the down payment and each month grows by the investment return and receives the ownership cost minus that month's rent
• Whichever net cost is lower is the cheaper option over the chosen horizon

Renting at $2,000/month (3% annual increases) vs. buying a $400,000 home with 20% down at 6.5% over 30 years, staying 7 years, with typical tax, insurance, and maintenance assumptions.

1. 1Down payment = 20% of $400,000 = $80,000, so the loan is $320,000 over 360 months at 6.5%.
2. 2The monthly P&I payment is about $2,022, before property tax, insurance, and maintenance are added.
3. 3Rent starts at $2,000 and rises 3% each year while ownership costs and home value both grow monthly.
4. 4After 7 years the net cost of renting is about $126,272 against $157,127 for buying, so renting comes out roughly $30,855 ahead — 7 years is not long enough for the equity built to overtake selling costs plus the return on the cash a renter keeps invested.
5. 5The break-even year, if inside the horizon, marks the point where staying longer starts to favor buying.

Why does renting sometimes win even though home prices rise?

Because selling costs, mortgage interest, and taxes are real cash costs paid the whole time you own, and short stays don't give appreciation and equity enough time to outweigh them. The longer you stay, the more that math tends to favor buying.

What is the 'invested portfolio if renting' number?

It represents what a renter's down payment and any monthly cash savings would grow to if invested at the assumed return, rather than being tied up as home equity. It is the renter's equivalent of the buyer's home equity.

How sensitive is the result to the appreciation rate?

Very. A percentage point or two of annual appreciation compounded over several years changes home equity by a large amount, so it is worth running this calculator with a conservative and an optimistic appreciation figure.

Does this include mortgage interest tax deductions?

No. Tax treatment varies by household and by whether you itemize, so this is a pre-tax comparison. It also excludes moving costs, renovations, and rent deposits for simplicity.

What should I do with the break-even year?

Compare it to how long you actually expect to stay. If your planned stay is well short of the break-even year, renting is the lower-cost choice on these numbers; well beyond it, buying tends to win.