Rent vs Buy Calculator
Should you rent or buy? Compare where your net worth lands after renting versus buying — with appreciation, rent growth, and invested savings — and find the year buying pulls ahead.
The home
Renting
Assumptions
- Owning, all-in (year 1)$2,839.28/mo
- Renting (year 1)$2,200.00/mo
- Monthly gap$639.28/mo
| Year | Buyer net worth | Renter net worth |
|---|---|---|
| 1 | $62,617 | $93,283 |
| 2 | $77,804 | $106,975 |
| 3 | $93,588 | $121,090 |
| 4 | $109,997 | $135,640 |
| 5 | $127,058 | $150,639 |
| 6 | $144,802 | $166,103 |
| 7 | $163,262 | $182,045 |
The renter is assumed to invest the down payment plus every month's savings (owning cost minus rent) at 7.0% a year. The buyer builds equity through price appreciation (3.0%/yr) and loan paydown, minus 8.0% selling costs. Estimates only — taxes, tax deductions, and rent control rules aren't modeled.
How the math works
The calculator runs a net-worth race. Both sides start with the same money — your down payment — and we check who's richer at the end of your time horizon.
The buyer's path: you pay the down payment plus closing costs upfront, then each month you pay mortgage principal and interest plus property taxes and insurance. At the end, your housing net worth is the home's appreciated value minus your remaining loan balance minus selling costs (agent commissions and fees, roughly 6–8%). Every mortgage payment quietly builds equity; appreciation builds it faster.
The renter's path: instead of a down payment, you invest it at your assumed annual return. Each month, you compare the all-in cost of owning to your rent and invest the difference. If owning would cost $2,500 a month all-in and rent is $2,000, the renter invests $500 that month. This is the only fair comparison — it credits renting with what the renter actually saves.
The break-even year is the first year the buyer's net worth pulls ahead of the renter's and stays ahead. Early years favor renting (big upfront costs, and early mortgage payments are mostly interest); later years favor buying (equity compounds). The inputs that move it most: the investment return you assume, the appreciation rate, and how long you stay.
Worked example
Buy a $350,000 home with 20% down ($70,000) and a $280,000 mortgage at 6.5% for 30 years. Monthly principal and interest: $1,769.79. Comparable rent: $2,000/month, rising 3% a year; property taxes and insurance: $400/month.
After 5 years the home is worth about $425,829 at 4% annual appreciation, and the loan balance is down to $262,111. Subtract 8% selling costs ($34,066) and the buyer's housing net worth is $129,651.
The renter invested the $70,000 down payment at 7%: $99,234 after 5 years — plus the early years' monthly savings invested along the way ($3,885), for $103,119 total. Buying wins by about $26,500 at year 5 in this scenario — mostly on the back of appreciation.
What to watch for
- The investment return is the whole game. At a 10% return the renter looks brilliant; at 3% buying usually wins early. Be honest about what you'd actually earn — most people's "invested difference" earns 0% because it gets spent.
- Appreciation is a forecast, not a fact. At 0% appreciation, renting typically wins for a decade or more. Run the calculator at 2%, 4%, and 6% to see how sensitive your answer is.
- Short stays punish buyers. Closing costs plus selling costs can eat ~10% of the price round-trip. Under about four years, renting usually wins regardless of the other inputs.
- The tax angle matters if you itemize. Mortgage interest and property tax deductions (within the SALT cap) effectively discount owning. Talk to a tax professional about your situation.
- Non-financial factors count. Mobility for work, tolerance for maintenance, and stability for kids don't show up in net worth — but they should show up in your decision.
Frequently asked questions
How does the rent vs buy calculation work?
It compares net worth at the end of your time horizon. The buyer ends with home equity (appreciated value minus remaining loan balance minus selling costs). The renter ends with the down payment plus each month's savings — the difference between the all-in cost of owning and rent — invested at your assumed return. Whichever leaves you richer wins.
What is the break-even year?
The first year buying pulls ahead of renting and stays ahead. Early on, renting usually wins because buying has big upfront costs (down payment, closing costs) and early mortgage payments are mostly interest. Given enough years, appreciation and paydown typically tip the scales to buying — often somewhere between years 4 and 10.
Why does the renter get to 'invest the difference'?
Because it's the honest comparison. If owning costs $2,800/month all-in and renting costs $2,200, the renter has $600/month the buyer doesn't. Assuming the renter invests it (rather than spending it) shows what renting is really worth. If you'd spend the difference instead, lower the investment return — or set it near 0% to see renting at its worst.
What doesn't this calculator include?
It's simplified: no tax deductions for mortgage interest, no rent control, no HOA special assessments, and it assumes you actually invest the renter's savings. It also assumes you sell at the end of the horizon — if you'll stay 30 years and pay the loan off, buying looks even better.
What is the 5% rule for rent vs buy?
A quick rule of thumb: multiply the home price by 5% and divide by 12 — that's the approximate monthly cost of owning before mortgage principal paydown (roughly 3% for property tax and maintenance, plus ~2% cost of capital). If rent is well below that number, renting is usually cheaper; if rent is close to or above it, buying deserves a serious look. It's a shortcut, not a verdict — run the full calculator for your numbers.
Does the calculator include maintenance and repairs?
No — the model stays simple and doesn't add a separate maintenance line. Budget roughly 1% of the home's value per year as a rule of thumb, and know that including it pushes the break-even year later. If the home is older or you expect big repairs, mentally add that cost to the buying side.
How does a larger down payment change the result?
A bigger down payment helps buying three ways: a smaller loan means less interest, you may avoid PMI, and you start with more equity. But it also means more cash tied up that the renter side would have invested — so the advantage is smaller than it looks. The calculator captures both effects.
What if I plan to stay 30 years and pay the loan off?
Buying usually wins by a wide margin. Once the mortgage is gone, your housing cost drops to taxes, insurance, and maintenance while rent keeps climbing. The calculator's sell-at-the-end assumption actually understates buying for lifelong owners — if you'll stay put, lean buy.