Rent vs Buy Calculator
Compare the true cost of renting versus buying a home over any time horizon. Accounts for mortgage payments, home appreciation, rent increases, investment returns, and transaction costs.
Is It Cheaper to Rent or Buy?
The rent-vs-buy decision depends on how long you stay, local home appreciation, your investment return on the down payment alternative, and transaction costs. Enter your numbers to find the crossover point where buying becomes cheaper than renting.
- Total cost of buying: Mortgage payments, taxes, insurance, maintenance, closing costs, minus equity built
- Total cost of renting: Monthly rent with annual increases, plus investment returns on the down payment
- Break-even year: When cumulative buying costs fall below cumulative renting costs
- Net worth comparison: Home equity vs. investment portfolio growth over your time horizon
Costs the Simple Math Misses
- Transaction costs: Buying costs 2–5% upfront (closing costs) and 6–8% to sell (agent commissions, transfer taxes) — you need appreciation just to break even on a short hold
- Maintenance: Budget 1–2% of home value annually — a $400K home costs $4,000–8,000/year in repairs, replacements, and upkeep that renters don't pay
- Opportunity cost of down payment: $80,000 invested at 7% annual return grows to ~$305,000 over 20 years — this is the hidden cost of the down payment
- Rent increases: Historically 3–5% annually — rising rent makes buying look better over longer time horizons
- Tax benefits: Mortgage interest and property tax deductions benefit itemizers; the standard deduction makes this less relevant for most buyers since 2018
Rules of Thumb for Rent vs. Buy
- Price-to-rent ratio: Divide home price by annual rent for a comparable home. Below 15 = buying favors; 15–20 = neutral; above 20 = renting may favor. San Francisco and NYC often exceed 30–40.
- Stay at least 5 years: Transaction costs mean buying rarely wins in under 3–5 years regardless of appreciation
- The 5% rule: Multiply home price by 5%, divide by 12 — if monthly rent is below this, renting is financially equivalent to owning (accounts for property tax, maintenance, and opportunity cost of equity)
Frequently Asked Questions
Is buying always better than renting long-term?
Not necessarily. In high price-to-rent ratio markets (San Francisco, Manhattan, many coastal cities), renting and investing the difference has historically matched or outperformed buying — especially accounting for the high transaction costs of selling. In lower price-to-rent markets (many Midwest and Southern cities), buying builds wealth faster. The calculator models your specific market and time horizon rather than applying a universal rule.
What home appreciation rate should I use?
The national average home appreciation is roughly 3–4% annually over the long run — approximately equal to inflation. Some markets average higher (Austin, Miami) and some lower. Using 3% is a conservative baseline; 5% is historically aggressive for most markets. The rent-vs-buy outcome is very sensitive to this assumption — run the calculator at 2%, 3%, and 5% to see the range of outcomes.
Does the calculator account for building equity?
Yes — equity from mortgage paydown and home appreciation is credited to the buying scenario. However, equity is illiquid until you sell or tap it via a HELOC/cash-out refinance. The calculator compares net worth (home equity vs. investment portfolio) to show the full financial picture, not just monthly payment comparisons.