Rent vs Buy Calculator

The rent-vs-buy decision is one of the most consequential financial choices most households make—and it's far more nuanced than "renting throws money away." Both options have invisible costs and benefits. The clean way to compare them is to compute the net cost of housing for each path over the years you expect to stay, then see which is lower.

What buying actually costs

The true cost of buying isn't just the mortgage payment. Over your holding period, you pay:

• Closing costs at purchase (typically 2%–5% of price)
• Mortgage interest (not principal—principal is recovered at sale)
• Property taxes, net of any tax deduction benefit
• Homeowners insurance and HOA dues
• Maintenance and repairs (typically 1% of home value annually)
• Selling costs at the end (typically 6% including agent commissions)
• PMI if your down payment is under 20%

Offsetting these costs are two big benefits: home appreciation (the home is worth more when you sell than when you bought it) and tax savings from deducting mortgage interest and property taxes if you itemize. The formula simplifies to: Net cost = Sunk costs − Appreciation − Tax savings.

What renting actually costs

Renting has one obvious cost—rent itself—plus renter's insurance. But the hidden financial benefit is the opportunity cost of the down payment. If you rent, the cash you would have put toward a down payment and closing costs stays invested in stocks, bonds, or other assets. At a 7% average annual return, a $90,000 down payment grows to about $144,000 over 7 years—$54,000 of investment growth that offsets rent paid. Renters may also invest the monthly difference when rent is lower than total housing costs.

The break-even horizon

The break-even horizon is the number of years you must stay in the home for buying to become cheaper than renting. In the first few years, buying almost always loses because closing costs are sunk and little principal has been paid down. As years pass, fixed transaction costs amortize, appreciation accumulates, and rent rises with inflation—eventually buying pulls ahead. Our calculator runs a year-by-year simulation to find the exact crossover point.

Why the answer varies by market

The price-to-rent ratio—home price divided by annual rent—is the single best predictor of which option wins. In low-ratio markets (under 15), buying usually wins quickly. In high-ratio markets (over 20, common in coastal cities like San Francisco and New York), renting can win even over 10+ year horizons because the down payment invested outperforms the home's appreciation. A $1M home that rents for $3,000/month has a price-to-rent ratio of 27.8—strongly favoring renting even before considering transaction costs.

Factors beyond the math

The calculator captures the financial picture, but real life includes non-financial factors: the flexibility to relocate for a job, the psychological value of ownership, the burden of maintenance, school district stability, and the option value of being able to renovate. Use the financial result as one input—rarely as the sole deciding factor.