Enter home purchase price, monthly rent, planned years of stay, down payment, mortgage rate, and annual appreciation/rent inflation rates to determine whether renting or buying makes better financial sense.
How to use this calculator
Enter the purchase price of the target home and your current or comparable monthly rent.
Specify how many years you plan to live in the home before moving or selling.
Set your available down payment percentage and mortgage interest rate.
Adjust expected annual home value appreciation and rent increase percentages.
Read your clear financial verdict (whether buying or renting is cheaper and by how much).
Formula & method
Rent vs. Buy Capital Cost Equations
Net Buying Cost = (DP + Total Mortgage + Taxes/Ins/Maint) − (Home Value_future − Mortgage Balance_rem − Selling Costs) · Net Renting Cost = Total Rent Paid − DP Investment Returns
DP = down payment, selling costs = 6% realtor commission, DP returns = 5% conservative index return.
Example
$350k home vs $2,000/mo rent over 7 years → Buying builds $110k equity after selling costs, making buying cheaper by ~$25,000.
Key insights
Transaction costs (closing fees when buying and 6% realtor commission when selling) mean buying usually requires at least 4 to 7 years to beat renting.
Renting preserves capital mobility: invested down payment cash can earn compound returns in stock market index funds.
Homeownership builds equity through principal forced savings and home appreciation, serving as a hedge against rising rent inflation.
Property taxes, homeowner's insurance, and ongoing maintenance add approximately 2.5% to 3.0% of the home value in annual non-equity costs.
How to interpret your result
Financial Verdict
Identifies which decision results in a higher net worth at the end of your specified stay period.
Net Cost of Buying
Calculates total mortgage payments, taxes, insurance, maintenance, and selling costs minus equity recovered from sale.
Net Cost of Renting
Calculates cumulative rent payments minus investment gains earned from investing your down payment cash elsewhere.
Frequently asked questions
How many years do I need to live in a house for buying to be better than renting?
On average, the breakeven point between renting and buying is 4 to 7 years due to upfront closing costs and selling fees.
Is renting really throwing money away?
No, renting provides shelter without upfront capital lockup, property tax liabilities, maintenance costs, or market depreciation risk.
Does this calculator include property tax and home insurance?
Yes, the calculation accounts for annual property taxes (1.2%), insurance (0.4%), and routine maintenance (1.0%).
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