Buying a home builds equity, but it also ties up a down payment, adds costs a renter never sees, and loses 5–6% of the price when you sell. Renting is flexible and leaves your cash free to invest. This rent vs. buy calculator compares the two on what actually matters, your net worth at the end, year by year. It also shows the break-even year, after which buying stays ahead.
How to use the rent vs. buy calculator
- Under Buying, enter the home price, down payment, mortgage rate and term. Then add the costs of buying and selling, property tax, maintenance, insurance, any HOA dues and how fast you expect the home’s value to grow.
- Under Renting, enter the rent for a comparable home, the yearly rent increase and renter’s insurance.
- Enter how long you expect to stay and the return your money would earn if it were invested instead.
How the comparison works
The calculator follows both households month by month:
- The buyer pays principal and interest plus property tax and maintenance, both tied to the home’s current value, and insurance and HOA dues, which rise with rent.
- The renter pays rent plus renter’s insurance.
- The renter starts with the cash the buyer spent at closing (down payment plus closing costs) and invests it. Each month, whichever household spends less invests the difference. Both portfolios earn the same return.
At the end of each year:
Worked example
A $400,000 home with 20% down at 6.5% for 30 years has a principal-and-interest payment of $2,022.62. Add 1.1% property tax, 1% maintenance and $1,800 a year of insurance, and month one costs $2,872.62 to own. A comparable rental is $2,300 plus $15 of renter’s insurance. Prices grow 3.5% a year, rent 3%, and invested money earns 6%.
| After | Buyer net worth | Renter net worth | Ahead |
|---|---|---|---|
| 1 year | $72,737 | $104,393 | Rent by $31,657 |
| 3 years | $108,343 | $129,917 | Rent by $21,574 |
| 5 years | $147,015 | $156,429 | Rent by $9,414 |
| 7 years | $189,045 | $183,933 | Buy by $5,112 |
| 10 years | $259,102 | $227,046 | Buy by $32,056 |
Buying breaks even in year 7. Stay 15 years and it is ahead by about $94,000. Leave in three and you would have been about $21,600 better off renting.
What tips the balance
- Time. Buying and selling costs are paid once. The longer you stay, the more years they are spread over.
- Price-to-rent ratio. Where homes cost 25 times annual rent or more, renting often wins for a long time. Where they cost 15 times rent or less, buying wins quickly.
- Appreciation vs. investment return. Leverage magnifies appreciation. A 3.5% rise on a $400,000 home is $14,000 on an $80,000 down payment. If prices stagnate, the renter’s portfolio usually wins.
- Mortgage rate. Higher rates mean more of each payment goes to interest rather than equity in the early years.
Beyond the math
Owning offers stability, control over your space and a forced savings habit. Renting offers flexibility, predictable costs and no large repair bills. Check what you can borrow with the house affordability calculator, see your full payment in the mortgage calculator, and estimate up-front cash with the closing costs calculator.
Estimates only, not financial advice. Future home prices, rents and returns are uncertain, and income taxes are not modeled.
Frequently asked questions
Is it better to rent or buy?
It depends mostly on how long you stay. Buying carries large one-time costs, about 3% of the price to buy and 6% to sell in this example, and appreciation needs time to cover them. With the default inputs, renting is ahead for the first six years and buying pulls ahead in year seven.
What is the opportunity cost of a down payment?
Money you put into a house can't be invested elsewhere. This calculator assumes the renter invests what the buyer spends up front, plus any month-to-month savings from cheaper rent, at the return you enter. That keeps the comparison fair.
Why does the buyer's net worth start so low?
Closing costs and the cost of eventually selling, typically 5–6% of the price for agent commissions and fees, are subtracted from home equity. At first they outweigh the little principal paid down and appreciation, so buying starts behind.
Does the calculator include the mortgage interest deduction?
No. With the 2026 standard deduction at $16,100 for single filers and $32,200 for married couples filing jointly, many homeowners don't itemize. The interest deduction only helps when your itemized deductions exceed the standard deduction.
What is the 5% rule for renting vs. buying?
A rough shortcut multiplies the home price by about 5%, for property tax, maintenance and the cost of capital, and divides by 12. If comparable rent is below that number, renting is likely cheaper. For a $400,000 home that is about $1,667 a month. A full comparison like this calculator's accounts for appreciation, the loan and how long you stay.