Rent vs. Buy Calculator

What the calculator compares

Buying and renting are not just a payment against a payment. The two sides are compared as two ways to end up with money at the same point in the future. On the buying side, the number is what you would walk away with after selling: the home's value, minus what is still owed on the loan, minus the cost of selling. On the renting side, the number is an investment portfolio that starts with the cash you would have used for the down payment and closing costs, and then receives (or pays out) the monthly difference between what owning costs and what renting costs. When owning costs more each month, the difference is added to the portfolio. When renting costs more, which often happens many years in, the portfolio is drawn down to cover the gap. The break-even year is the first year-end at which the buyer's number is at least as large as the renter's.

Worked example with the starting values

Take a $400,000 home with 20% down at 6.5% for 30 years, 3% closing costs, 1.1% property tax, $1,500 insurance, 1% maintenance, 3% yearly growth in value, and a $2,200 rent that rises 3% a year, with the renter earning 5% a year on the invested money. The loan is $320,000 and the payment is $2,022.62 a month. The up-front cash is $92,000: $80,000 down and $12,000 in closing costs. In year 1 the all-in cost of owning is about $2,869 a month against about $2,217 for renting (rent plus renters insurance), so the renter invests roughly $650 a month on top of the $92,000 starting portfolio.

Early on, renting wins. After one year the buyer's number is about $70,857 (after 6% selling costs) and the renter's is about $104,481. After five years it is $136,332 against $155,466. Buying pulls ahead in year 9, and by year 10 the buyer has about $234,029 against $220,679. By year 30 the loan is gone and the buyer is ahead by a wide margin, about $912,651 against $441,885, because the renter is still paying rent that has grown so that renting costs about $5,224 a month, while the owner pays only taxes, insurance and upkeep. That last gap is mostly the effect of long-run rent growth, so treat the year-30 number as less reliable than the break-even year.

What changes the answer most

Changing one input at a time from the same starting values shows which assumptions carry the result. With rent at $1,800 instead of $2,200 the break-even moves from year 9 to year 30, and the two sides end almost level ($912,651 against $906,937). With home values flat (0% growth) the break-even moves out to year 24. With only 5% down, which adds a PMI premium until the balance falls to 80% of the price, a larger loan and a higher payment, the break-even is year 14. If the invested money earns 8% a year instead of 5%, renting stays ahead for the whole 30 years. With a 5% rate instead of 6.5%, buying breaks even in year 5. The pattern is that the rent-to-price ratio, the length of time you will stay, the interest rate and the return you could earn elsewhere matter far more than small changes in maintenance or insurance.

How long you plan to stay

The up-front costs of buying and the roughly 6% cost of selling are large, so a short stay almost always favors renting in this model. A common rule of thumb is that buying needs several years to recover those costs, and the calculator lets you test that for your own numbers by reading the table at the year you expect to move. If the break-even year is later than the year you expect to leave, the numbers say renting leaves you better off in money terms. Owning also has non-financial value, such as stability and control over the property, that this tool does not try to price.

Frequently asked questions

Why is the renter's number bigger in the first years?

The renter keeps the down payment and closing costs invested, and the buyer immediately pays closing costs and (in the model) would pay selling costs if they sold. Early mortgage payments are mostly interest, so the buyer builds little equity at first.

Does the calculator include the mortgage interest deduction?

No. Whether the deduction helps depends on whether you itemize, your tax bracket and the current rules, none of which are modeled. If you itemize, buying would look somewhat better than shown.

Where do the percentages for closing, selling and maintenance come from?

They are rules of thumb used as editable starting points, not official figures. Your own Loan Estimate shows real closing costs, and local property tax and insurance can differ a lot from the examples.

Why does the model assume a constant return on the renter's money?

A single steady rate keeps the comparison transparent. Real investments move up and down, and a bad stretch early on would hurt the renter more than a smooth average suggests. Try several rates to see the range.

Methodology and sources

Each month the loan accrues interest of balance × rate ÷ 12 and the standard fixed payment is applied. Property tax and maintenance are a percentage of the home's current value, which grows at your chosen rate (compounded monthly from a yearly figure). Insurance, HOA fees and renters insurance grow once a year at the rate you set; rent grows once a year at its own rate. PMI, if the down payment is under 20%, is a yearly percentage of the original loan paid monthly until the loan balance reaches 80% of the original price. The buyer's all-in monthly cost minus the renter's monthly cost is added to (or taken from) the renter's portfolio, which grows by your yearly return converted to a monthly rate. Results are reported at the end of each year. The tool does not discount future dollars to present value.

Sources used for context on this page: CFPB, Buying a house (the four-step homebuying process and tools); CFPB, Loan Estimate explainer (estimated cash to close, homeowner's insurance premiums paid at or before closing, and mortgage insurance when the down payment is under 20%); CFPB, What is private mortgage insurance?. The default values for rates, rent, taxes, closing and selling costs and maintenance are illustrative assumptions of this site, not figures taken from those pages.

Limitations and assumptions

This is an educational estimate and not financial advice, and the site operator is not a financial adviser. It assumes a fixed-rate loan held the whole time, no refinancing, no extra principal payments, steady growth rates, no vacancy or special assessments, and no taxes of any kind. Real home prices and rents vary by city and over time, and a home is a single large, illiquid asset. Use the calculator to see which assumptions your answer depends on, then check them against quotes and local data.