Rent vs Buy Calculator

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Compare total cost of renting vs buying over your chosen time horizon. Accounts for appreciation, opportunity cost, and all expenses.

🏠 BUYING

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🏢 RENTING

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Better Financial Choice

Total Cost of Buying
Total Cost of Renting

Buying cost is net of home equity gained. Renting cost is net of investment growth on down payment. Many non-financial factors (stability, flexibility) also matter.

📐 Formula

Net Buy Cost = Mortgage Payments + Maintenance + Down Payment − Home Equity. Net Rent Cost = Total Rent − Investment Growth on Down Payment

How to Use the Rent vs Buy Calculator

1

Enter home price and down payment

Input the purchase price of the home you are considering and your available down payment. The down payment determines loan size, monthly payment, and whether PMI applies.

2

Enter current rent

Input your current monthly rent or the rent you would pay for a comparable property. This is the primary alternative cost compared against buying.

3

Set the time horizon

How long you plan to stay is the most important variable. The breakeven point — where buying becomes cheaper than renting — typically falls between 4 and 8 years depending on market and assumptions.

4

Enter appreciation and investment return rates

Home appreciation and investment return assumptions drive long-term outcomes. Historical US home appreciation averages 3–4% annually; stock market returns average 7–10%. Adjust these for your local market and risk tolerance.

The Rent vs Buy Decision: What the Numbers Show

The rent vs buy decision is one of the most analysed questions in personal finance — and the answer consistently depends on three factors: how long you plan to stay, local price-to-rent ratios, and what you do with the savings if you rent. The common assumption that buying is always better than renting is not supported by the data in high price-to-rent markets or short time horizons.

The price-to-rent ratio is a useful first filter: divide the home's purchase price by the annual rent for a comparable property. A ratio below 15 generally favours buying; 15–20 is neutral; above 20 favours renting. In San Francisco, ratios often exceed 40, meaning you pay $40 in purchase price for every $1 of annual rent — mathematically, renting and investing the difference outperforms buying across most scenarios at that ratio. In cities like Detroit or Memphis with ratios of 10–12, buying is almost always superior.

The Five-Year Rule of Thumb

Buying a home incurs transaction costs of 8–10% of the purchase price: 2.5–3% buyer's agent commission (now negotiated separately post-NAR settlement), title insurance (~0.5%), lender fees (0.5–1%), prepaid items, and on the sale side another 2.5–3% seller's commission plus transfer taxes. On a $400,000 home, this totals $32,000–$40,000 in round-trip transaction costs. These must be recovered through equity accumulation and appreciation before the home's financial performance exceeds renting. For most markets and price points, this breakeven occurs between 4–7 years — hence the common five-year rule: if you are not confident you will stay for five years, renting is likely the lower-risk financial choice.

The Equity Build vs Opportunity Cost Trade-off

Homeownership builds equity through two mechanisms: principal paydown (initially slow — early mortgage payments are mostly interest) and property appreciation. The down payment and monthly principal payments represent capital that could alternatively be invested. In a 7% mortgage rate environment, the risk-free comparison is clear: paying off a 7% mortgage is equivalent to earning 7% guaranteed on that capital, which is competitive with most investment alternatives. At 3% rates (as seen in 2020–2022), the calculus shifts — investing the down payment in equities earning 7–10% could outperform the 3% mortgage paydown, making a smaller down payment financially rational.

Sources & Methodology

Calculations are based on the most current publicly available data from authoritative government and industry sources:

Frequently Asked Questions

Not always. Buying makes more financial sense if you plan to stay 5+ years, home prices are reasonable relative to rents, and you have a stable income. Renting is better for flexibility, uncertain timelines, or in expensive markets.
Divide home price by annual rent for a comparable property. Under 15: buying is favourable. 15–20: neutral. Over 20: renting may be smarter financially. Major cities often have ratios of 25–40+.
Closing costs (2–5% of purchase price), property taxes, homeowner's insurance, HOA fees, maintenance (budget 1–2% of home value annually), and the opportunity cost of the down payment.
At current mortgage rates (6.5–7.5%) and high home prices, renting is often financially superior in expensive coastal metros for time horizons under 5–7 years. Buying wins over 7+ years in most markets due to equity building and inflation protection. The break-even depends on local rent-to-price ratios, your opportunity cost, and expected tenure.
Price-to-rent ratio = home price ÷ annual rent. A ratio below 15 favors buying; 15–20 is neutral; above 20 favors renting (San Francisco ~40, NYC ~30, Austin ~22). The national median is around 17–18 in 2026. High ratios mean renting is cheap relative to owning — your down payment could generate better returns invested elsewhere.
Save: down payment (3–20% of home price), closing costs (2–5% of loan amount), 3–6 month emergency fund after closing, and a 1% annual home maintenance reserve. On a $350,000 home with 10% down: $35,000 down + $10,500 closing costs = $45,500 needed at minimum. Many first-time buyers underestimate closing costs and post-purchase maintenance.