How to use the rent vs. buy calculator
Enter the price of a home you are considering, your down payment, the mortgage rate, the rent for a comparable place, and how many years you expect to stay. The calculator compares what you would have at the end in each case and shows the year when buying starts to pay off. Advanced mode lets you change every assumption, from home price growth to selling costs.
Why it's not just rent vs. mortgage payment
Comparing rent to a mortgage payment misses most of the picture. Owners also pay property tax, insurance, maintenance, and large one-time costs when buying and selling. Renters, meanwhile, keep their down payment invested. On the other side, owners build equity and benefit if the home gains value. This calculator accounts for all of these.
Example
A $400,000 home with 20% down at 6.5% needs about $92,000 in cash and costs about $2,873 in the first month once tax, insurance, and maintenance are included, compared with $2,000 in rent for a similar place. With 3% yearly home price and rent growth and a 5% investment return, renting comes out about $34,600 ahead after 7 years. Buying only pulls ahead after about 17 years. If rent were $3,000 instead, buying would win within 3 years.
When buying tends to win
- You plan to stay many years.
- Rents are high compared with home prices in your area.
- Home values in your area are growing steadily.
- You can get a low mortgage rate.
Ready to look at a specific home? Estimate the full payment with our mortgage calculator, and read how much house can I afford.
Frequently asked questions
Is it better to rent or buy a home?
It depends mostly on how long you will stay, how much homes in your area appreciate, how rent compares to the full cost of owning, and what your savings would earn if invested. Buying usually wins the longer you stay, because buying and selling costs are spread over more years.
What is the break-even point?
The break-even point is how many years you need to own before buying leaves you better off than renting and investing the money you would have spent on a down payment and higher monthly costs.
Why does the calculator invest the renter's savings?
A fair comparison assumes the renter doesn't spend the down payment. Instead, that money, plus any monthly savings from renting, is invested. Without this, renting looks worse than it really is.
What is the 5% rule for renting vs. buying?
A quick rule of thumb: multiply the home price by 5% and divide by 12. If you can rent a similar home for less than that each month, renting may be the better deal. The 5% roughly covers property tax, maintenance, and the cost of money tied up in the home.
Does this include tax benefits?
No. Mortgage-interest deductions, capital gains rules, and taxes on investment returns vary by country and personal situation, so they are left out. They can shift the result, so check with a tax professional for your case.
This guide is for general education and is not financial, tax, or legal advice. See our disclaimer.