How does this rent vs buy calculator work?

The calculator projects the yearly cash flows of renting and buying over your chosen time horizon. For renting, it grows rent by your expected annual increase and tracks the investment growth of your upfront cash and monthly savings. For buying, it includes mortgage payments, property tax, insurance, maintenance, transaction costs, and home price appreciation. It then discounts both paths using your after‑tax investment return to show which option has the higher net worth at the end.

What assumptions does the calculator make about taxes and maintenance?

By default, the calculator assumes property tax and homeowners insurance are a fixed percentage of the home value and that annual maintenance averages a percentage of the home value as well. You can adjust all three. For simplicity, mortgage interest tax deductions are not included by default, but you can approximate their effect by lowering your after‑tax investment return or adjusting the effective cost of owning.

Is it always better to buy if I stay long enough?

Not always. Buying tends to become more attractive the longer you stay because transaction costs are spread over more years and you build more equity. However, if your rent is low relative to home prices, if you can earn a high return on investments, or if property taxes and maintenance are high, renting can still be better even over long periods.

What is the break‑even year when buying beats renting?

The calculator computes the year‑by‑year difference in net worth between renting and buying. The break‑even year is the first year when the cumulative net worth from buying becomes higher than from renting. You can see this visually in the comparison chart and in the results table.

How should I choose the investment return and discount rate?

Use an after‑tax, after‑inflation return that reflects how you would actually invest your savings (for example 3–5% real for a diversified stock portfolio). The calculator uses this rate both to grow invested savings and to discount future cash flows back to today, so you are comparing options in present‑value terms.

Rent vs Buy Calculator

Compare the long‑term financial impact of renting versus buying a home, including appreciation, maintenance, taxes, and investment returns.

1. Inputs

Renting

Current monthly rent Annual rent increase (%) Renter's insurance (monthly)

Buying

Home price Down payment (%) Mortgage rate (APR %) Loan term (years)

Ownership costs

Property tax (% of home value / year) Home insurance (% of home value / year) Maintenance & repairs (% of home value / year)

Market & investment assumptions

Home price growth (% per year) Investment return (% per year, after tax) Time horizon (years)

31040

Upfront & transaction costs

Buyer closing costs (% of home price) Seller costs at sale (% of sale price)

Include investment opportunity cost

We assume you invest any upfront and monthly savings at your chosen investment return.

2. Results

Net worth after 10 years

Includes home equity or invested savings, minus selling costs.

If you rent

If you buy

Recommendation

Enter your numbers and click “Calculate” to see which option builds more wealth.

Net worth over time

Show detailed year‑by‑year table

Year	Rent paid	Invested savings (rent)	Net worth (rent)	Mortgage principal	Home value	Owner costs	Net worth (buy)

How this rent vs buy calculator works

This tool is designed to mirror the depth of professional rent vs buy analyses while staying transparent and easy to tweak. It compares the long‑term wealth you could build by renting and investing the difference versus buying a home and building equity.

Step 1 – Model the rent path

For each year we calculate:

Annual rent = current rent × 12, grown by your rent increase rate.
Renter’s insurance cost.
How much cash you keep invested instead of using it for a down payment and closing costs.
Any monthly savings from renting vs owning, invested at your chosen return.

Your net worth as a renter is simply your invested savings (no home equity).

Step 2 – Model the buy path

For buying, we simulate:

Mortgage amortization (principal and interest) based on price, down payment, rate, and term.
Property tax, homeowners insurance, and maintenance as percentages of the home value.
Home value growth using your appreciation rate.
Buyer closing costs at purchase and seller costs when you sell.

Your net worth as an owner is:


                  Owner net worth = (Home value − Selling costs − Remaining
                  mortgage balance) + Invested savings (if any)

Step 3 – Opportunity cost of cash and monthly payments

The key advantage of renting is flexibility and the ability to invest your cash. The calculator:

Invests your upfront cash if you rent (down payment + closing costs).
Each year, compares total annual housing cost for renting vs owning.
If renting is cheaper that year, the difference is invested and compounds.

If you disable “Include investment opportunity cost”, we still compare cash flows but ignore the extra investment growth.

Step 4 – Break‑even year and recommendation

We track the net worth difference between renting and buying for each year. The break‑even year is the first year where buying produces higher net worth than renting.

The recommendation is based on which option has the higher net worth at the end of your chosen time horizon. You can drag the time horizon slider to see how the answer changes if you move sooner or stay longer.

Key formulas

Mortgage payment

For a loan amount \(L\), monthly rate \(r\), and \(n\) months:
\( \text{Payment} = L \times \dfrac{r(1+r)^n}{(1+r)^n - 1} \)

Home value growth

If the home grows at rate \(g\) per year for \(t\) years:
\( \text{Home value}_t = \text{Price}_0 \times (1+g)^t \)

Investment growth

For a lump sum \(P\) and annual return \(i\):
\( \text{Future value} = P \times (1+i)^t \)

When renting can beat buying

You expect to move again within a few years (transaction costs dominate).
Local property taxes, insurance, or HOA fees are high relative to rent.
You can earn a strong after‑tax return on investments.
Home prices are stretched relative to local incomes and rents.

When buying can beat renting

You plan to stay put for a long time (10+ years).
Rents are rising faster than home prices.
You value stability and are comfortable with maintenance responsibilities.
You can lock in a favorable mortgage rate.

Limitations and things this calculator simplifies

It does not explicitly model mortgage interest tax deductions or itemized deductions.
It assumes constant percentage rates for taxes, insurance, and maintenance.
It ignores inflation explicitly; you can think in today’s dollars and use a real (after‑inflation) investment return.
It does not price in non‑financial factors like commute, school quality, or flexibility.

Use this tool as a starting point for your decision, then layer in your personal risk tolerance, job stability, and lifestyle preferences.

Rent vs buy calculator – FAQs

How accurate is this rent vs buy calculator?

No calculator can predict future home prices, rents, or investment returns. This tool is accurate in the sense that it consistently applies your assumptions to both renting and buying, so you can see how sensitive the decision is to each input. The most important drivers are time horizon, rent growth, home appreciation, and your investment return.

What time horizon should I use?

Use the number of years you realistically expect to stay in the area and in a similar‑priced home. If you might move sooner, slide the horizon down and see how the recommendation changes.

How do I account for HOA fees or condo fees?

Add recurring HOA or condo fees to the ownership side by increasing the maintenance percentage or by mentally adding them to the annual owner costs shown in the detailed table. A future version of this tool may include a dedicated HOA input.

Should I include my emergency fund in the analysis?

Your emergency fund should exist regardless of renting or buying, so it usually does not change the comparison. However, if buying would deplete your cash buffer, that extra risk is important even if the calculator shows a small financial edge for owning.

What if I plan to pay off the mortgage early?

You can approximate early payoff by shortening the loan term (for example, using 20 years instead of 30) or by mentally treating extra principal payments as part of your investment allocation. The core trade‑off remains: tying money up in home equity versus keeping it in flexible investments.