Rent vs Buy Calculator
Should you rent or buy? It comes down to how long you stay. This tool compares the true net cost of each — counting home equity, appreciation, and the return a renter earns by investing the down payment — and tells you your break-even year. Instant, no sign-up, method shown.
Costs, growth & assumptions
Quick answer
On a $400,000 home against $2,200 rent, over 7 years renting comes out $12,248 cheaper — buying costs $166,663 in net terms against renting’s $154,415. The break-even is year 9. But change the assumed house price growth and that answer flips entirely. Change the inputs above and this answer updates with your own numbers.
Net cost over time — buy vs rent
Blue = buying, green = renting. Where blue drops below green is your break-even year.
Who wins at each horizon
The same inputs, judged over different lengths of stay.
| Stay | Net cost buying | Net cost renting | Winner |
|---|
The comparison almost everyone gets wrong
"Renting is throwing money away" compares a rent payment with a mortgage payment, and that is not the comparison. Large parts of a mortgage payment are also gone forever: interest, property tax, insurance and maintenance build no equity at all. Only the principal portion is saving.
The honest comparison has two sides:
- Buying costs — interest, tax, insurance, maintenance, and the transaction costs of purchase and eventual sale — offset by the equity you end up holding.
- Renting costs — the rent, offset by what the deposit and any monthly difference earn while invested instead.
That second offset is the one usually forgotten. A renter who invests the deposit is not standing still, and leaving it out is what makes buying look automatically better.
Time is what decides it
$400,000 home, 20% down, 6.5% mortgage, 3% appreciation, against $2,200 rent rising 3% a year, with the deposit invested at 6%:
| If you stay | Net cost of buying | Net cost of renting | Cheaper |
|---|---|---|---|
| 3 years | $93,893 | $63,505 | Rent |
| 5 years | $130,975 | $108,067 | Rent |
| 7 years | $166,663 | $154,415 | Rent |
| 10 years | $217,178 | $227,262 | Buy |
| 15 years | $291,462 | $357,235 | Buy |
Under these assumptions the crossover is year 9. Before it, renting wins; after it, buying wins and keeps widening. The single most useful question is therefore not "can I afford to buy" but "how long am I actually staying".
Transaction costs decide short stays
Buying costs about 3% of the price to enter and roughly 6% to leave. On a $400,000 home that is $12,000 in, $24,000 out — around $36,000 that has to be recovered through appreciation and principal repayment before ownership breaks even at all.
Over fifteen years that is a rounding error. Over three it is decisive, which is why the three-year row above is not close. If there is a realistic chance of moving within a few years, the transaction costs alone usually settle the question.
The whole answer hangs on one unknowable number
This is the section other rent-versus-buy calculators tend to skip, and it is the most important one. Everything above assumed 3% annual house price growth. Here is the same seven-year comparison with only that assumption changed:
| House price growth | Result over 7 years | Break-even year |
|---|---|---|
| 0% | Renting saves $90,817 | Year 28 |
| 2% | Renting saves $40,057 | Year 15 |
| 3% | Renting saves $12,248 | Year 9 |
| 4% | Buying saves $17,289 | Year 6 |
| 6% | Buying saves $81,906 | Year 3 |
Read the break-even column. It moves from year 3 to year 28 on an assumption nobody can know in advance. The gap between the extremes over seven years is more than $170,000.
So the honest conclusion is not a verdict but a method: run your own numbers at a pessimistic appreciation rate as well as an optimistic one. If buying wins in both, it is a strong case. If it only wins at 5-6% growth, you are not making a housing decision — you are making a bet on the housing market, and it deserves to be recognised as one.
What the model cannot price
- Security and control. Not being asked to leave, and being allowed to change the kitchen, are worth something the arithmetic cannot capture.
- Flexibility. Renting lets you move for a job in weeks. Selling takes months and costs 6%.
- Forced saving. The model assumes the renter invests the difference. Many do not, and for them buying can win in practice even when it loses on paper.
- Maintenance surprises. The 1% annual assumption is an average, not a schedule. Roofs fail all at once.
- Rate changes. A fixed mortgage locks your cost; rent does not, and the model's 3% rent growth is only an assumption too.
How the comparison is calculated
Month by month, the model accumulates the true cost of each path and compares them at your chosen horizon:
- Buying: mortgage interest, property tax, insurance, maintenance and HOA, plus closing costs at the start and selling costs at the end — minus the equity you hold when you sell.
- Renting: rent, growing at your assumed rate — minus the investment return earned on the deposit and any monthly saving versus the cost of owning.
Principal repayments are not counted as a cost, because that money is still yours inside the house. Interest is, because it is not.
See the method with your own numbers
These update live from the calculator inputs above.
Example: $400,000 home vs $2,200 rent
- Over 7 years: buying costs $166,663 net, renting $154,415 — renting wins by $12,248.
- Break-even: year 9.
- Over 15 years: buying costs $291,462 against renting's $357,235 — buying wins by $65,773.
Same house, same rent, same everything. Only the length of stay changed, and the answer reversed by more than $78,000.
Frequently asked questions
Is it better to rent or buy?
It depends almost entirely on how long you stay and on house price growth. On a $400,000 home against $2,200 rent, renting is cheaper for the first nine years and buying wins after that. But at 0% appreciation the break-even moves to year 28, and at 6% it moves to year 3 — so run your own numbers at more than one appreciation rate before treating any answer as settled.
How long do I need to stay for buying to be worth it?
In the default scenario, nine years. The main reason it takes that long is transaction costs: roughly 3% to buy and 6% to sell means about $36,000 on a $400,000 home that has to be recovered before ownership breaks even at all. Higher appreciation shortens it; flat prices can push it past twenty years.
Is renting really throwing money away?
No more than mortgage interest is. Interest, property tax, insurance and maintenance build no equity either — only the principal portion of a payment is saving. A fair comparison also credits the renter with what the deposit earns while invested, which is the part that usually gets left out.
Does the calculator include maintenance and closing costs?
Yes: annual maintenance as a percentage of value, property tax, insurance, HOA, closing costs on purchase and selling costs on exit. Leaving any of them out is how comparisons end up flattering ownership.
What house price growth should I assume?
Whatever you assume, also try 0%. The default 3% is a common long-run planning figure, but the result is extremely sensitive to it — over seven years the gap between 0% and 6% appreciation is more than $170,000. If buying only wins under optimistic growth, that is a bet on the market rather than a housing decision.
What if I would not actually invest the deposit?
Then renting performs worse in reality than it does on paper, because the model credits the renter with investment returns on the deposit and on any monthly saving. If that money would simply be spent, a mortgage acts as forced saving, and buying can be the better outcome for you even where the arithmetic says otherwise.
Method & sources
- Calculation: Month-by-month simulation of ownership carrying costs and mortgage amortization vs cumulative rent, netted against home sale equity and investment growth on the down payment.
- Simplifications (disclosed): excludes mortgage-interest tax deductions and reinvestment of monthly cash-flow differences; property tax/insurance/maintenance modeled as a percentage of home value per year.
- Reviewed: · Assumptions reviewed quarterly.
Educational estimate, not financial advice. Housing and investment returns vary and can be negative.
Run your own numbers
Enter the price, your deposit, the rent you would pay instead and how long you plan to stay — then try it again at a lower appreciation rate.
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