About the Rent vs. Buy Calculator
A rent versus buy calculator compares the total cost of both paths over a holding period, which is the only comparison that means anything. A mortgage payment is not the cost of owning, and rent is not money thrown away — the useful question is which option leaves you better off after several years.
The formula
Net cost of buying = payments + costs − equity built − appreciationBuying costs include mortgage payments, property tax, insurance, and maintenance. Against that you set the principal you repay and any increase in the property's value, both of which you recover on sale.
How to use this calculator
- 1Enter your Monthly Rent ($). The field starts at
2000, which you can overwrite. - 2Enter your Home Price ($). The field starts at
400000, which you can overwrite. - 3Enter your Down Payment (%). The field starts at
20, which you can overwrite. - 4Enter your Mortgage Rate (%). The field starts at
6.5, which you can overwrite. - 5Enter your Annual Home Appreciation (%). The field starts at
3, which you can overwrite. - 6Read the result straight away — it recalculates as you type, so there is no button to press. Use Share to copy a link that reopens the page with your exact numbers filled in.
Worked example
| Input | Value |
|---|---|
| Monthly Rent ($) | 2000 |
| Home Price ($) | 400000 |
| Down Payment (%) | 20 |
| Mortgage Rate (%) | 6.5 |
| Annual Home Appreciation (%) | 3 |
Result
5yr Rent Cost: $120,000
5yr Buy Net Cost: $149,647
Better Choice: Renting
Those are the values the page loads with, so you can reproduce this result yourself and then change one field at a time to see what drives the outcome.
Understanding your result
Buying carries large one-off costs at both ends — 2 to 5 percent to buy, 6 to 10 percent to sell — which have to be recovered before ownership beats renting. That is why the holding period dominates the answer. Below roughly five years, renting usually wins; well beyond it, buying usually does.
Two assumptions do most of the work in any such comparison, and both are uncertain. The appreciation rate determines how much value you accumulate, and the rent growth rate determines how quickly the alternative gets more expensive. Small changes to either can flip the conclusion, so test a pessimistic case rather than trusting a single result.
Things worth knowing
- Include the opportunity cost of your deposit. Money tied up in equity is money not invested elsewhere.
- Maintenance is a real ownership cost of roughly 1 to 2 percent of value per year, and it lands unpredictably.
- Renting has genuine, quantifiable value: mobility, no exposure to a single property's price, and no responsibility for the roof.
- The mortgage interest deduction only helps if you itemise, which most US filers no longer do since the standard deduction increased.
- Property taxes and insurance rise over time, so a fixed mortgage payment does not mean a fixed cost of ownership.
Frequently asked questions
How long do I need to stay for buying to be worth it?+
Commonly five to seven years, enough to recover buying and selling costs through equity and appreciation. In expensive markets with high price-to-rent ratios the threshold is longer; in cheaper markets it can be shorter.
Is renting really throwing money away?+
No. Rent buys housing, flexibility, and freedom from maintenance and market risk. Mortgage interest, tax, insurance, and upkeep are equally unrecoverable — only the principal portion builds equity.
What if home prices fall after I buy?+
You could owe more than the property is worth, which prevents selling or refinancing without bringing cash to the table. A longer intended holding period and a larger deposit are the main protections.
Does the price-to-rent ratio help decide?+
It is a useful screen. Divide the purchase price by annual rent for a comparable property: under 15 tends to favour buying, over 20 tends to favour renting. It ignores your personal circumstances, so treat it as a starting point.