How the rent vs. buy calculator works
The "rent vs. buy" question is really a comparison of two investment paths. Buying locks money into a house; renting leaves that money free to be invested elsewhere. This calculator tracks both paths month by month and compares the net worth each leaves you with.
The model
Rent net worth = (Down payment + Closing costs) grown at the investment return + Monthly savings from renting
Monthly payment = L × r ÷ (1 − (1 + r)^−n), where r = rate ÷ 12 and n = months
Each month, both households spend the same total amount. If owning costs more than rent, the renter invests the difference; if rent is higher, the owner invests it. Home value grows at your appreciation rate and rent rises at your rent-growth rate.
Step-by-step example
Scenario: $400,000 home, 20% down, 6.5% 30-year mortgage, 1.1% property tax, $1,500 insurance, 1% maintenance, 3% appreciation, versus $2,200 rent rising 3% a year and a 6% investment return.
- Loan: $320,000. Monthly principal & interest: about $2,023. With tax, insurance and maintenance, month-one ownership cost is about $2,849.
- Cash up front: $80,000 down + $12,000 closing = $92,000, which the renter invests instead.
- After 10 years: buying leaves about $234,000 of net worth; renting and investing leaves about $240,000. Renting wins by roughly $6,300.
- After 15 years, buying leads by about $30,000, and the break-even point is year 12.
What the calculator does not include
- Mortgage-interest and property-tax deductions, which can favor buying if you itemize.
- Capital-gains exclusions on a primary residence (up to $250,000 single / $500,000 married).
- Non-financial factors such as stability, freedom to renovate or flexibility to move.
Frequently asked questions
It depends on how long you will stay, local price-to-rent ratios, mortgage rates and what you could earn investing the difference. Buying usually wins over longer horizons because of principal paydown and appreciation; renting often wins over short stays because buying has large upfront and selling costs.
It assumes both paths spend the same total each month. Whichever option costs less in a given month invests the difference, and the renter also invests the down payment and closing costs. At the end we compare each side’s net worth: home equity after selling costs (plus any invested savings) versus the renter’s investment portfolio.
Principal and interest, property tax, homeowners insurance, HOA dues, maintenance, closing costs when buying and agent/closing fees when selling. Mortgage-interest and property-tax deductions are not included, which slightly favors renting.
The first year in which the buyer’s net worth catches up with the renter’s. If it is later than the time you plan to stay, renting is likely the cheaper choice.
Home appreciation, the return you could earn on investments, mortgage rate and your time horizon move the answer most. Try different values with the sliders to stress-test the decision.
Disclaimer: this calculator provides estimates for educational purposes only and is not financial, tax or legal advice. Consult a qualified professional before making financial decisions.