How to use the Rent vs Buy calculator
- Enter buying details. Fill in home price, down payment, mortgage rate, loan term, property tax rate, home insurance / yr, maintenance / yr, HOA / month, closing costs.
- Enter renting details. Fill in monthly rent, rent increase / yr, renters insurance / yr.
- Enter assumptions details. Fill in years you plan to stay, home value growth / yr, investment return / yr, selling costs.
- Read your results. Results update instantly. The headline shows the after 7 years, renting leaves you ahead by; the breakdown and table below show the details.
How the comparison works
The calculator follows two versions of you month by month. The buyer pays the mortgage, property tax, insurance, maintenance and HOA, and builds equity as the loan is paid down and the home appreciates. The renter pays rent and renters insurance and invests the down payment and closing costs instead. Whichever path is cheaper in a given month invests the difference.
At the end of your horizon, the buyer’s net worth is home value minus selling costs minus the remaining loan, plus any invested savings. The renter’s net worth is their investment portfolio.
What drives the answer
- Time: buying has large one-time costs (closing ~2–5%, selling ~6%), so short stays usually favor renting.
- Price-to-rent ratio: where homes cost more than about 20× annual rent, renting often wins.
- Appreciation vs. investment return: small changes swing the result, so try a few scenarios.
For a property tax rate, see your county’s rate or your state’s average on the mortgage calculator by state pages.
Worked example
With these inputs (main ones shown): home price $400,000; down payment 20%; mortgage rate 6.5%; loan term 30y; property tax rate 0.9%; home insurance / yr $1,800; maintenance / yr 1%; closing costs (buy) 3%.
The calculator gives an after 7 years, renting leaves you ahead by of $13,217 (buying doesn’t pull ahead within this horizon). Other results: monthly P&I $2,022.62, home equity after selling costs $173,101, total paid to own $241,531, total rent paid $203,549.
What your results mean
The headline is the difference in net worth at the end of your horizon. A break-even year tells you how long you need to stay for buying to come out ahead under these assumptions.
Tips
- Run a pessimistic case with low appreciation.
- Use 1–2% of the home’s value per year for maintenance.
- If you might move within 3–4 years, renting usually wins.
Frequently asked questions
What is the 5% rule for rent vs buy?
A rule of thumb: the unrecoverable cost of owning is about 5% of the home value per year (property tax, maintenance and cost of capital). If annual rent is lower than that, renting may be cheaper.
What price-to-rent ratio favors renting?
Ratios above about 20 (price ÷ annual rent) tend to favor renting; below about 15 tend to favor buying.
How long do I need to stay for buying to pay off?
Commonly 5–7 years, but it depends on local prices, rents and rates. The “Buying pulls ahead in year” figure shows your break-even.
Is rent just throwing money away?
No more than mortgage interest, property tax and maintenance are. Both paths have unrecoverable costs; this calculator compares them fairly.
Does it include tax benefits?
No. Since the standard deduction is large, most buyers don’t itemize, so the mortgage interest deduction often has little effect.
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