Rent vs. Buy Calculator
Compare the true long-term cost of renting vs buying a home. Accounts for mortgage, property tax, maintenance, appreciation, and what a renter could earn by investing the down payment instead. Year-by-year net worth comparison included.
The True Cost of Buying a Home
Your monthly mortgage payment is just the starting point. To understand whether buying makes sense, you need to account for every dollar that homeownership costs — and every dollar it earns you through equity and appreciation.
Upfront costs at purchase include the down payment (typically 3–20% of home price), closing costs (2–5% of loan amount), and any immediate repairs or improvements. On a $350,000 home with 10% down and 3% closing costs, you need roughly $45,500 cash before you even move in.
Ongoing ownership costs go well beyond principal and interest. Property taxes average 1.1% of home value nationally — $3,850/year on a $350,000 home. Homeowner's insurance averages $1,500–$3,000/year. Maintenance and repairs should be budgeted at 1% of home value annually (more for older homes). HOA fees average $200–$400/month in communities that have them. If your down payment is under 20%, PMI adds 0.5–1.5% of the loan amount per year until you reach 20% equity.
The equity gain comes from two sources: mortgage paydown (every payment that goes to principal builds equity) and home price appreciation. The 30-year US average appreciation is approximately 3.5% nominal (roughly flat in real terms after inflation). Over 10 years, a $350,000 home appreciating at 3.5% annually is worth about $492,000 — a gain of $142,000 in nominal terms.
The True Cost of Renting
Renting's costs are simpler and more transparent: monthly rent, renter's insurance ($15–$30/month), and any utility costs not covered by the landlord. There are no surprise repair bills, no property tax obligations, and no transaction costs when you move.
The key financial consideration for renters is opportunity cost of the down payment. If a renter would have put $35,000 down on a home, they can instead invest that $35,000. At 7% annual return (S&P 500 historical average, inflation-adjusted), $35,000 grows to $68,860 in 10 years and $137,370 in 20 years. This calculator models this opportunity cost, showing the renter's net worth as the sum of invested savings plus ongoing monthly investment of any spending difference.
Rent increases are the main financial risk for renters. US rents have historically increased 3–4% annually, but can spike sharply in tight markets (rents rose 20–30% in many cities in 2021–2022). If your rent increases faster than assumed, the calculation shifts in favor of buying. Rent control protections vary widely by city and state.
How to Read the Year-by-Year Comparison
This calculator tracks net worth for both scenarios over time. For the buyer, net worth equals home value minus remaining mortgage balance (home equity), minus cumulative non-equity costs (taxes, insurance, maintenance). For the renter, net worth equals the invested down payment plus invested monthly savings, both compounding at the assumed investment return rate.
The breakeven year is when the buyer's net worth line crosses the renter's. Before that point, renting is winning financially; after it, buying is ahead. In most US markets, this crossing happens between years 4 and 8.
Key assumptions that most strongly affect the outcome: home appreciation rate (3% vs 5% changes the buyer's result dramatically), investment return (higher returns favor renting), and how long you stay (shorter periods almost always favor renting due to transaction costs).
Neither scenario is inherently superior — the right answer is personal. Homeownership provides stability, forced savings (every mortgage payment builds equity), and the ability to customize your living space. Renting provides flexibility, lower financial risk, and potentially higher liquid returns in expensive markets.
Frequently Asked Questions
Is it better to rent or buy a home?
There is no universal answer. Buying typically wins financially after 5–7 years in most US markets due to equity building and appreciation. Renting wins in high-cost markets (price-to-rent ratio above 20) or when you plan to move within 3 years, since buying and selling costs of 7–11% of home value wipe out short-term gains. Use this calculator with your local numbers to find your personal breakeven.
What is the price-to-rent ratio?
The price-to-rent ratio is the home price divided by the annual rent for a comparable property. Below 15 generally favors buying; 15–20 is neutral; above 20 often favors renting. San Francisco and New York often exceed 30, while cities like Cleveland and Detroit frequently see ratios below 10. You can calculate yours by dividing the home price you're considering by 12 times the monthly rent for a comparable place.
How much down payment do I need?
The minimum is 3% with conventional loans (Fannie Mae/Freddie Mac) or 3.5% with FHA loans. Veterans and eligible borrowers can use VA loans with 0% down. However, anything below 20% triggers PMI (private mortgage insurance), adding 0.5–1.5% of the loan amount per year. The ideal down payment is 20% to avoid PMI — though in expensive markets, many buyers reasonably put down less and accept PMI, especially if home appreciation is strong.
Does renting mean throwing money away?
No — this is a persistent myth. Renters spend on housing without building equity, but homeowners 'throw away' money on mortgage interest (60–80% of early payments), property taxes, insurance, and maintenance. A disciplined renter who invests the down payment and monthly savings can come out ahead of a homeowner in many markets, especially over shorter time horizons or in expensive cities.
What closing costs should I budget for?
Closing costs when buying a home typically run 2–5% of the loan amount. Common items include: loan origination fee (0.5–1%), appraisal ($400–$600), title insurance ($1,000–$2,000), property taxes prepaid at closing, homeowner's insurance prepaid, and various lender fees. When selling, you'll pay 5–6% in real estate agent commissions plus 1–3% in other selling costs. Budget these one-time costs into your total cost of ownership calculation.
