Rent vs Buy Calculator

There is no universal answer. It depends on how long you plan to stay, local home prices vs rent, your mortgage rate, and what return you could earn by investing the down payment instead. This calculator models all of those side by side and tells you the break-even year: the point at which buying becomes the cheaper option.

A popular shortcut: multiply the home price by 5% to estimate the annual non-recoverable cost of owning (roughly 1% property tax, 1% maintenance, 3% mortgage interest minus home appreciation). Divide by 12 for a monthly number. If rent is lower than that, renting is usually cheaper. If rent is higher, buying tends to win. This calculator refines that with your actual numbers.

These are the biggest reasons buying needs a long time horizon to pay off. Closing costs typically run 2 to 5% of the home price and are paid upfront. Selling costs (realtor commission plus closing) typically cost 6 to 10% of the sale price. So on a $400k home you might lose $32k to $40k just on the round-trip transaction, and every month you rent you avoid that.

It is the year where your cumulative net cost of buying drops below the cumulative net cost of renting. Before that year, renting is ahead. After that year, buying pulls ahead and keeps pulling. Typical break-even ranges from 3 to 7 years in balanced markets, but can be 10+ years in expensive coastal cities where home prices are very high relative to rent.

This is your opportunity cost: what your down payment would have earned if invested in stocks or bonds instead of a down payment. A reasonable historical assumption is 6% to 7% for a stock-heavy portfolio, 4% to 5% for a balanced mix, or 4% for a conservative Treasury-heavy portfolio. Using a higher return makes renting look better, because the renter's investment grows faster.

Not directly. Since the 2017 tax law raised the standard deduction, most households no longer itemize, so the deduction rarely changes the outcome meaningfully. If you do itemize and benefit, you can model it by reducing the effective mortgage rate by roughly 0.5% to 1%, which is a conservative proxy for the tax savings.

For horizons over 10 to 15 years, buying almost always wins in normal markets because you stop paying rent, rent keeps rising, and mortgage principal builds equity. That said, the calculator still compares total wealth, so even long-term you can find cases (very slow appreciation, very low rent) where the renter who invests aggressively comes out ahead.