Rent vs Buy Calculator

Compare the true 5-year cost of renting vs buying a home. Accounts for opportunity cost, equity building, tax benefits, and break-even timeline.

🏠 Real Estate📐 Net Buy Cost = Mortgage + Tax + Maint - Equity Gain - Tax Savings
Monthly rent ($)
Home purchase price ($)
Down payment ($)
Interest rate (%)
Annual home appreciation (%)
Years to compare
Please enter valid values.

Formula & Reference

VariableFormulaUnits
Rent vs Buy CalculatorNet Buy Cost = Mortgage + Tax + Maint - Equity Gain - Tax Savings$ 5-yr net

Step-by-Step Examples

Example 1
Balanced Market

$1,800 rent vs $350K buy, 20% down, 6.75%, 4% appreciation, 5 years.

  • 5-year rent: ~$96,000 (with increases)
  • 5-year buy net cost: closing + payments - equity gain
  • Close call at 5 years; buying wins at 7+ years
✓ Close at 5 years; buying wins by year 7
Example 2
Hot Market

$2,500 rent vs $400K buy, 6% appreciation.

  • High appreciation favors buying faster
  • Break-even may be 4-5 years in hot markets
✓ Buy wins faster in appreciating markets
Example 3
Short Stay

Plan to stay only 3 years.

  • Closing costs + selling costs (6%) reduce buy advantage
  • Under 5 years: renting usually better unless strong appreciation
✓ Rent wins under 3-5 year time horizon

Real-World Applications

🏠
First-Time Buyers
Make a data-driven rent vs buy decision before purchasing.
💰
Financial Advisors
Help clients evaluate the wealth-building tradeoffs of each option.
🏢
Corporate Relocation
Evaluate rent vs buy for relocating employees based on planned stay.
📊
Real Estate Analysts
Quick comparison tool for market analysis presentations.

Common Mistakes to Avoid

⚠️
Not including opportunity cost of the down payment

The down payment invested in the stock market at 7-10% annual returns is a real cost of buying. On $70K down, the opportunity cost over 10 years can exceed $100K.

⚠️
Not accounting for selling costs

When you eventually sell, you'll pay 5-6% in agent commissions + 1-2% in closing costs. On a $400K home, that's $24,000-$32,000. Factor this into any break-even analysis.

⚠️
Assuming buying always wins

In high-cost markets, short time horizons, or slow appreciation areas, renting and investing the difference can outperform buying. The math depends on local market conditions.

Frequently Asked Questions

Is it better to rent or buy? ▾
Depends on: how long you'll stay (5+ years favors buying), local price-to-rent ratio, expected appreciation, opportunity cost of down payment, and personal flexibility needs. In most US markets with a 7+ year horizon, buying builds more wealth.
What is the price-to-rent ratio? ▾
Divide home price by annual rent. Under 15: buying is clearly better. 15-20: buying is usually better with a 5+ year horizon. Over 20: renting may be financially advantageous. NYC and SF are often 25-40+.
How long do you need to stay for buying to make sense? ▾
Generally 5-7 years to recover closing costs and selling costs through equity and appreciation. In rapidly appreciating markets, the break-even can be 3-4 years. In flat markets, 7-10 years.
Does buying always build wealth? ▾
Historically yes in most US markets over long periods. But some markets (Detroit, parts of Midwest) have seen home values stagnate or decline. Real estate wealth also requires significant ongoing investment (maintenance, taxes, insurance).
What if I can't afford a 20% down payment? ▾
3-5% down programs exist (conventional, FHA, VA). You'll pay PMI until reaching 20% equity, but buying earlier captures appreciation sooner. Calculate whether the PMI cost is less than your potential rent increases over time.

Related Calculators

🏠 Mortgage🏠 Affordability🏠 Closing Costs🏠 Property Tax🏠 PMI