Rent vs Buy Calculator
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Compare total cost of renting vs buying over your chosen time horizon. It compares mortgage payments, maintenance and home equity against rent and the return on your down payment. Property tax, insurance and selling costs are not included.
Quick answer: It depends on your price-to-rent ratio and time horizon: a ratio under 15 favors buying, 15–20 is neutral, and over 20 favors renting. After 5 years the renter ends up about $33,000 ahead of the buyer in the worked example below ($380,000 home, $2,200/month rent, 7.28% mortgage, 7% investment return, about 7% selling costs). The price-to-rent ratio there is 14.4, just under the 15 line, so that rule alone points to a roughly neutral result. Transaction costs of roughly 7–12% of the price across buying and selling take years of equity build-up to recover, so the five-year rule is only a rough guide. The calculator above is simpler and shows buying ahead by about $35,100 on the same inputs; the section "Why the calculator gives a different answer" below explains the gap.
🏠 BUYING
🏢 RENTING
Better Financial Choice
Buying cost is net of home equity gained. Renting cost is net of investment growth on down payment. A negative net cost means that option nets you ahead financially, not behind. 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
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 and monthly payment. PMI is not included here, so add it by hand if your down payment is under 20%. The calculator assumes a 30-year fixed-rate loan.
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.
Enter the yearly rent increase
Input how much you expect rent to rise each year. Leave it blank to use 3%. Higher yearly increases make buying look better, because the rent you avoid grows each year.
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 7 years depending on market and assumptions.
Enter appreciation and investment return rates
Home appreciation and investment return assumptions drive long-term outcomes. Historical US home appreciation averages roughly 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 analyzed 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 favors buying; 15–20 is neutral; above 20 favors renting. National estimates for 2026 vary by data source and methodology (roughly 16–23, per published price-to-rent analyses), but individual markets differ far more sharply than the national figure suggests (the city figures below are illustrative, our rounded estimates):
| Market | Price-to-Rent Ratio | Typical Verdict |
|---|---|---|
| San Francisco, CA | ~40 | Strongly favors renting |
| New York City, NY | ~30 | Favors renting |
| Austin, TX | ~22 | Favors renting |
| National average (2026) | ~16–23 | Neutral to favors renting |
| Memphis, TN | ~10–12 | Strongly favors buying |
| Detroit, MI | ~10–12 | Strongly favors buying |
In a market like San Francisco, a ratio of ~40 means 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. Run your own local numbers with the mortgage calculator to see the monthly payment behind any purchase price before comparing it to rent.
The Five-Year Rule of Thumb
Buying and then selling a home incurs round-trip transaction costs of roughly 7–12% of the purchase price. Buying costs run about 2–5% (lender fees, title insurance, prepaid items and other closing costs; the buyer's agent commission is now negotiated separately since the National Association of Realtors (NAR) settlement), and selling costs run about 5–7% (agent commissions, closing fees and transfer taxes). On a $400,000 home, that is $28,000–$48,000 in round-trip transaction costs (see the closing costs calculator for a full breakdown of buyer- and seller-side fees). 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, since 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.
Weighing renting versus buying in South Africa? The SA property market has its own distinct cost structure: transfer duty, conveyancing attorney fees, and bond registration costs are all paid upfront by the buyer, significantly affecting the breakeven horizon. Price-to-rent ratios in Cape Town, Johannesburg, and Durban also differ substantially from US norms. SA Property Tools provides South African rent-vs-buy analysis alongside transfer duty, bond repayment, and rental yield calculators built for the SA property market.
How to Compare Renting vs Buying by Hand: Worked Example
Compare renting at $2,200/month (held flat) against buying a $380,000 home with 20% down ($76,000), financing $304,000 at 7.28% over 30 years.
Monthly cost of buying: P&I payment of $2,080 (using the standard amortization formula) plus property tax (~$348), insurance ($125, or $1,500 a year, the low end of our estimate of $1,500–$3,000 a year) and maintenance reserve (~$317, roughly 1% of value a year) = $2,870/month, or $670 more than renting.
The buyer's side after 5 years. The buyer pays down roughly $17,000 of principal and, at 3% a year (the low end of the roughly 3–4% historical range), gains about $60,524 in value, so the home is worth about $440,524. Selling costs of about 7% (agent commission and closing costs; the top of the 5–7% selling range, so a cautious assumption for the buyer) come to roughly $30,837, and the loan balance is about $287,000, so the buyer ends with about $122,688 in cash after selling costs.
What does the renter's side look like?
The renter keeps the $76,000 and invests it at 7% a year, compounded monthly, which grows to about $107,740 in 5 years. The renter also invests the $670 a month the buyer spends above rent on the same terms, which grows to about $47,968. Together that is an ending value of about $155,708. Both figures are ending wealth, not profit: the renter's total includes the $76,000 starting amount and the renter's own monthly contributions, not just the growth on them. Like for like, the renter finishes roughly $33,000 ahead of the buyer ($155,708 vs. $122,688) on these assumptions.
This example holds rent flat; if rent rises each year the monthly gap shrinks and the renter's lead narrows. It also leaves out the buyer's purchase closing costs, which would widen the lead. The result is sensitive to appreciation, the investment return and the holding period, so change them in the calculator rather than relying on a rule of thumb.
Why the calculator gives a different answer
The calculator is simpler than this example. It leaves out property tax, insurance and selling costs, and it credits the renter only with growth on the down payment, not on the monthly difference. On the same inputs (3% appreciation, $3,800 maintenance, flat rent, 7% return, 5 years) it reports buying ahead by about $35,100. Treat the calculator as a first pass and the worked example as the fuller picture.
Is There a Reliable "Breakeven" Point Between Renting and Buying?
What is the five-year rule of thumb, and why five years?
The common guideline holds that buying rarely beats renting on a purely financial basis before roughly five years of ownership, because closing costs (both buying and selling) and slow early-mortgage equity buildup take that long to overcome. Selling after just 1–2 years frequently loses money once the roughly 2–5% buying costs and 5–7% selling costs are combined, even in a rising market.
How much does the local rent-to-price ratio matter?
The rent-to-price ratio is the inverse of the price-to-rent ratio discussed above (monthly rent ÷ home price, instead of price ÷ annual rent): a market where rent is unusually cheap relative to home prices (a low rent-to-price ratio) tilts the math toward renting, even over a long horizon, while a market with high rent relative to home prices tilts toward buying. The $2,200-rent-vs-$380,000-home example above works out to a monthly rent-to-price ratio of roughly 0.58%, below the 1% that landlords use as a quick screen for a strong rental property. That is the same example as the 14.4 price-to-rent ratio in the quick answer ($380,000 ÷ $26,400 a year): it sits just under the 15 line, at the boundary between buying and neutral. So the ratio does not settle it, and the result depends heavily on appreciation and investment-return assumptions.
Does the calculator account for the tax treatment of each option?
Not directly: the calculator's own formula (shown in the formula box above) compares mortgage payments, maintenance and equity against rent and investment growth, with no tax adjustment built in. Mortgage interest and property tax may be deductible for itemizing filers, which effectively lowers the true cost of buying below the cost the calculator shows, though the 2017 tax law's larger standard deduction means fewer homeowners itemize than in the past. Renters receive no comparable deduction, which is a real (if often modest) factor worth adding on top of the calculator's result for higher-income buyers who do itemize.
Frequently Asked Questions
Sources & Methodology
Calculations are based on the most current publicly available data from authoritative government and industry sources: