Rent vs Buy Calculator

The comparison almost everyone gets wrong

The standard way to settle rent versus buy is to put the mortgage payment next to the rent check. On the default figures here that gives $2,022.62 against $2,000 — almost identical, which looks like a clear case for buying.

It is not the right comparison. The mortgage payment covers principal and interest only. Owning also means property tax, insurance, maintenance, and any PMI or HOA dues. Add them and the monthly cost of owning this house is $2,905.95 — about 45% more than the rent.

That gap is not an argument against buying. It is an argument against the comparison, because the rent check genuinely does include those things: your landlord pays the tax, the insurance and the repairs out of it. The honest test is total cost of ownership against total rent, not loan payment against rent.

The rent that makes buying worth it

Rather than asking "is buying better", it is more useful to ask what rent would justify it. On the default figures, that number is $2,334 a month.

Below that, renting comes out ahead over ten years. Above it, buying does — and the further above, the more decisively. Your actual rent of $2,000 sits below it, which is why the default result favours renting by about $66,086.

This is the most practical output on the page because rent is verifiable. You do not have to forecast house prices or argue about appreciation — you can check what comparable places rent for and see which side of the line you are on.

• Selling in 3 years — rent would need to be $2,882.
• Selling in 5 years — $2,564.
• Selling in 10 years — $2,334.
• Selling in 20 years — $2,235.
• Holding 30 years — $2,212.

The threshold falls as you stay longer, because the fixed costs of buying — the closing costs and the selling commission — get spread over more years. But notice how little it moves after the first decade: from $2,882 to $2,212 across 27 extra years. Time helps buying far less than most people assume.

Your down payment is the hidden cost

The most commonly ignored number in this comparison is the $85,000 you hand over at closing. It does not appear in the monthly payment, and it does not feel like a cost, because it becomes equity. But it is $85,000 that is no longer invested.

That opportunity cost is large enough to decide the question on its own. Holding everything else at the defaults and changing only the expected investment return:

• At a 3% return — buying wins in 8 years.
• At 5% — 16 years.
• At 7% — buying never wins within 40 years.
• At 9% or above — it never wins at all.

The break-even rent moves with it, from $1,896 at a 3% return to $2,546 at 9%. This is why the honest answer depends on a number most rent-versus-buy comparisons never mention: what else your money could be doing.

It also means the comparison is genuinely sensitive to market conditions. In an era of high mortgage rates and strong equity returns, buying is harder to justify on pure arithmetic than it was when rates were 3%.

What it costs to get out

Selling a house is expensive, and the cost scales with the price. On the default figures the home sells for about $537,567 after ten years, and the 6% assumed for commission and fees comes to $32,254 — roughly sixteen months of rent, paid once, at the end.

Combine that with the $5,000 of closing costs paid at the start and you have $37,254 of transaction costs that renting never incurs. Over a short hold that is devastating; over a long hold it becomes less significant, which is precisely why owning rewards staying put.

This is the main reason short horizons favour renting so strongly. At three years the default scenario leaves renting ahead by about $36,736, and the break-even rent has to reach $2,882 before buying competes.

Why the appreciation assumption matters so much

House price growth is the input people are most optimistic about, and it swings the result harder than almost anything else. At the defaults, changing only this:

• At 2% growth — buying never wins; break-even rent $2,533.
• At 3% — never wins; break-even rent $2,334.
• At 4% — never wins at ten years; break-even rent $2,116.
• At 5% — buying wins in 6 years; break-even rent $1,876.
• At 6% — buying wins in 4 years, ahead by about $76,482 over ten.

The difference between 3% and 5% is the difference between "never" and "six years". That is uncomfortably close to the range of plausible outcomes, which is the honest lesson: if your case for buying depends on assuming 5% annual growth, you are not making a financial decision, you are making a forecast.

The default here is 3%, near the long-run US average. It is deliberately conservative — raise it if you have a specific reason, but know that you are changing the answer rather than refining it.

Smaller down payments make this worse, not better

Putting less down feels like it should favour buying, because it ties up less cash. In this comparison it usually does the opposite, for two reasons: a larger loan means a larger monthly payment, and crossing below 20% adds PMI.

• At 5% down — $25,000 upfront but $3,443.53 a month, and a break-even rent of $2,452.
• At 10% down — $45,000 upfront, $3,308.78 a month, break-even rent $2,443.
• At 20% down — $85,000 upfront, $2,905.95 a month, break-even rent $2,334.

The smaller down payment does free up cash, and that cash earns a return. But the added monthly cost outweighs it here, so buying needs a higher rent to justify itself. Leverage cuts both ways — it reduces what you commit and increases what you pay every month.

What this calculator leaves out

Any rent-versus-buy model has to simplify. Being explicit about which simplifications matter is more useful than presenting a single authoritative number.

• Taxes. The mortgage interest deduction is excluded, as is capital gains treatment on investments. Both can matter and both depend on your situation.
• Rent growth is assumed steady. Real rents jump at renewal and can spike in a shortage.
• Home appreciation is assumed smooth. Actual paths are uneven, and a downturn right before you sell is the scenario that hurts most.
• Selling costs are fixed at 6%, which is typical but negotiable in some markets.
• Inflation is handled by compounding everything to the horizon, but your income, your rent and your expenses do not all move together.
• Non-financial factors: stability, the ability to renovate, the freedom to leave in thirty days, and the fact that you cannot be asked to move out of a house you own.

That last category is not a footnote. Plenty of people buy knowing it costs more, because they want a home they cannot be asked to leave. This calculator tells you the price of that — it does not tell you whether it is worth paying.