Rent vs. Buy Calculator

How the comparison works

Buying and renting are compared on equal footing: both start with the same cash and spend the same amount each month.

• The buyer pays the down payment and closing costs, then the mortgage, property tax, insurance, maintenance and HOA dues. At the end, the home is sold and selling costs and the remaining loan balance are paid off.
• The renter invests the cash the buyer spent up front and pays rent plus renters insurance.
• Each month, whoever has the lower housing cost invests the difference at the investment return you enter.

Buyer net worth = home value − selling costs − loan balance + buyer’s investments
Renter net worth = renter’s investments

The side with the higher net worth after your chosen number of years comes out ahead.

Example

A $400,000 home with 20% down at 6.5% for 30 years costs $2,839.29 in the first month (principal and interest plus 1% property tax, 1% maintenance and $1,800 a year of insurance). The same home rents for $2,200. With prices and rent each rising 3% a year, 3% closing costs, 6% selling costs and a 5% investment return:

• After 7 years, the buyer’s home equity after selling is $173,101. The renter, who invested the $92,000 the buyer paid up front plus the monthly difference, has $178,298. Renting comes out ahead by $5,197.
• Stay one more year and buying pulls ahead, in year 8.

Why time matters

Buying has large one-time costs: closing costs going in and selling costs (often 5% to 6%) going out. Early in a mortgage most of the payment is interest, so equity builds slowly. The longer you stay, the more those fixed costs are spread out and the more price growth and loan paydown work in the buyer’s favor. That is why the calculator also shows the first year in which buying pulls ahead.

The assumptions that swing the answer

• Home price growth vs. investment return. The home is leveraged, so its growth applies to the whole price, but a higher investment return makes renting and investing stronger.
• Rent increases. A fixed-rate mortgage payment does not rise; rent usually does.
• Maintenance. Owners pay for repairs that a landlord covers. 1% of the home’s value per year is a common starting point; older homes often need more.
• How long you stay. Try a few values to see how sensitive the result is.