Rent vs Buy Calculator
Compare the total cost of renting versus buying a home over any time horizon. Use this when deciding whether to purchase a home or continue renting, factoring in mortgage payments, property taxes, and down payment opportunity cost.
About this calculator
This calculator computes the net financial difference between renting and buying over your chosen time horizon. The buying cost includes your down payment, cumulative mortgage payments, and annual property taxes. Monthly mortgage payment is derived from the standard amortization formula: M = P × [r(1+r)ⁿ] / [(1+r)ⁿ − 1], where P is the loan principal (home price minus down payment), r is the monthly interest rate, and n is the total number of payments. The renting cost is simply monthlyRent × 12 × years. A positive result means renting is cheaper over the period; a negative result means buying costs less overall. Note that this simplified model excludes home appreciation, investment returns on the down payment, and tax deductions, which can meaningfully shift the outcome.
How to use
Suppose you're considering a $400,000 home with a $80,000 down payment, a 6.5% mortgage rate, $3,600 annual property tax, versus renting at $2,000/month over 10 years. Loan = $320,000; monthly rate r = 0.065/12 ≈ 0.005417; n = 120. Monthly payment M = 320,000 × [0.005417 × (1.005417)^120] / [(1.005417)^120 − 1] ≈ $2,023. Total buying cost = ($2,023 × 12 × 10) + ($3,600 × 10) + $80,000 = $242,760 + $36,000 + $80,000 = $358,760. Total rent = $2,000 × 12 × 10 = $240,000. Difference = $240,000 − $358,760 = −$118,760, indicating renting is cheaper over this period.
Frequently asked questions
What factors does the rent vs. buy calculator not account for?
The calculator focuses on direct cash outlays and does not model home price appreciation, which can substantially increase buying's long-term value. It also excludes the opportunity cost of investing your down payment in the stock market, mortgage interest tax deductions, HOA fees, maintenance costs (typically 1–2% of home value per year), and renter's versus homeowner's insurance differences. For a complete picture, you should factor these in separately or consult a financial advisor.
How does the time horizon affect whether renting or buying is cheaper?
Buying typically becomes more attractive over longer time horizons because the fixed costs (closing costs, down payment, early high-interest mortgage payments) are spread over more years. In the first few years, renting is often cheaper because buyers haven't built significant equity and closing costs haven't been recouped. Most financial studies suggest the break-even point between renting and buying is typically 5–7 years, though this varies heavily with local market conditions, mortgage rates, and rent levels.
What is a realistic down payment percentage to use in the rent vs. buy calculator?
The conventional standard is 20% of the home purchase price, which eliminates private mortgage insurance (PMI) and results in a lower monthly payment. However, many buyers use 3–10% down through FHA or conventional loan programs. Using a smaller down payment increases your loan principal and monthly payment, making buying less financially attractive in the short term. You should also consider whether the down payment cash could earn meaningful returns if invested instead, which is an implicit cost of home ownership not shown in this calculator.