Rent vs Buy Calculator

People also ask

What is a rent vs buy calculator?

A rent vs buy calculator compares the full multi-year cost of owning a home against renting a comparable one. It counts the buyer's down payment, closing costs, mortgage, taxes, insurance, HOA, maintenance, and eventual selling costs, credits back equity and appreciation, and credits the renter with investment growth on the cash they did not tie up in a down payment. The output is a break-even year and a dollar advantage at your planned horizon.

How is the break-even year calculated?

For every year up to 30, the calculator totals the net cost of buying (upfront cash plus cumulative ownership costs minus what you would pocket by selling that year) and the net cost of renting (cumulative rent minus the growth your invested down payment earned). The break-even year is the first year the buying total drops to or below the renting total. If that never happens within 30 years, the calculator reports no break-even.

Is it cheaper to rent or buy in 2026?

On a pure monthly basis, renting is cheaper than buying in most large U.S. metros in 2026, because mortgage rates near 6.5% to 7% and elevated prices push ownership costs well above comparable rents. Buying still wins over longer horizons in many markets once equity and appreciation accumulate. The honest answer depends on your market's price-to-rent ratio and how long you plan to stay, which is exactly what the break-even year measures.

How long do you need to stay in a home for buying to make sense?

Most scenarios produce a break-even between 3 and 7 years. Buying and selling costs roughly 9% to 12% of the home's value round-trip, and it takes years of equity buildup and appreciation to recover that. If you expect to move within 3 years, renting almost always wins; past 7 to 10 years, buying usually does.

Why does the calculator include an investment return on my down payment?

Because a renter does not tie up cash in a down payment, that money can compound elsewhere, an index fund, bonds, or income real estate. Ignoring that growth is the most common flaw in rent-vs-buy math and makes buying look artificially good. At a 7% return, $100,000 of avoided upfront cash grows by roughly $61,000 over 7 years, which is a real cost of choosing to own.

Does the calculator account for home equity?

Yes. Every year, the model calculates what you would walk away with if you sold: the appreciated home value minus selling costs and the remaining loan balance. That equity credit is what eventually makes buying win, early on it is small because payments are mostly interest and selling costs eat the gains, but it compounds as the loan amortizes.

What costs of owning do renters not pay?

Owners pay property taxes, homeowners insurance, all maintenance and repairs (roughly 1% of home value per year on average), HOA dues where applicable, and 6% to 8% selling costs when they leave. Renters pay rent and a small renters insurance premium, and the landlord absorbs the rest. That is why comparing rent to a bare mortgage payment understates the cost of owning by 20% to 30%.

How does home appreciation change the answer?

Appreciation is the single most powerful input. At 3.5% annual appreciation a $400,000 home gains about $110,000 of value in 7 years, which heavily favors buying. At 1% to 2%, the break-even can slip past a decade. Because nobody can predict local appreciation, run the calculator at a conservative, moderate, and optimistic rate and see whether the decision changes.

What is the 5% rule for renting vs buying?

The 5% rule is a shortcut: multiply the home price by 5% and divide by 12; if rent for a comparable home is less than that number, renting is likely cheaper. The 5% approximates the owner's unrecoverable costs: about 1% property tax, 1% maintenance, and 3% cost of capital. It is a useful screen, but a year-by-year model like this one captures rent growth, amortization, and selling costs that the shortcut ignores.

Should I buy a home as an investment?

A primary residence is usually a weaker pure investment than it feels: it produces no rent, consumes taxes, insurance, and maintenance, and concentrates wealth in one asset with 9% to 12% round-trip transaction costs. Owning can still build wealth through leverage and forced savings, but investors who want real estate returns without those frictions often do better renting where they live and buying income property, or fractional shares of rentals, where the numbers work.

Does this calculator include tax benefits of owning?

No. Since the standard deduction nearly doubled, most homeowners no longer itemize, so the mortgage-interest deduction provides no benefit to the majority of buyers. High earners in expensive homes who do itemize can see modest savings, which would shift the break-even slightly in favor of buying. Treat that as upside rather than baseline.