Rent vs Buy Calculator
This rent vs buy calculator runs a year-by-year simulation that pits the full cost of owning a home against the rising cost of renting over a horizon you choose. On the buying side it adds the mortgage, property tax, insurance, and maintenance, then credits back home equity and appreciation; on the renting side it grows the rent each year and gives the renter the investment growth of the money they would have used for a down payment. The result is a net cost for each path plus the break-even year where buying overtakes renting.
Formula
Annual buy outlay = Mortgage×12 + Price×(1.2% + 0.5% + 1.0%); Annual rent = Rent×12×(1 + g)^(year−1)
- Mortgage
- Monthly payment on (Price − Down) at the chosen rate and term
- g
- Annual rent-increase rate as a decimal
- Equity
- Appreciated home value minus loan amount, credited against buy cost
- Opportunity cost
- Down payment compounded at 7%, credited against rent cost
How it works
- Enter the Home Price, Down Payment, Monthly Rent, and set the Mortgage Rate and Loan Term sliders for the purchase scenario.
- Set the Rent Increase and Home Appreciation sliders (each 0%-10%) and choose the Years to Compare (1-30). The model assumes property tax of 1.2%, insurance of 0.5%, and maintenance of 1.0% of the home price per year, and a 7% opportunity-cost return on the renter's invested down payment.
- Each year it accumulates ownership costs net of growing equity and appreciation against accumulated rent net of the renter's investment gains, reporting the net Buy Total Cost, Rent Total Cost, and the first Break-Even Year (or N/A if buying never wins within the horizon).
Worked example
A $300,000 home, $60,000 down, 6% over 30 years versus $1,500 rent rising 3%/yr, 3% appreciation, compared over 10 years.
- Mortgage on $240,000 at 6% / 30 yrs ≈ $1,439/mo; annual ownership cost adds tax+insurance+maintenance of 300,000 × 2.7% = $8,100.
- Over 10 years the model nets the buy path against accumulated home equity and appreciation, yielding a Buy Total Cost ≈ $150,495.64.
- The renter's growing rent net of 7% investment growth on the $60,000 yields a Rent Total Cost ≈ $206,349.83.
Buy net cost about $150,495.64 vs rent net cost about $206,349.83 over 10 years; with these inputs the break-even shows as N/A because buying is already cheaper from the start of the horizon.
Frequently asked questions
- What assumptions are baked into the buying costs?
- Beyond your mortgage, the model assumes annual property tax of 1.2%, homeowners insurance of 0.5%, and maintenance of 1.0% of the home price. It also credits home appreciation and equity, so these fixed rates strongly influence whether buying wins.
- Why does the renter get an investment credit?
- A renter who does not buy can invest the down payment instead. The model grows that lump sum at a 7% annual opportunity-cost rate and subtracts the gains from the rent path, which is the fairest way to compare the two choices.
- What does a break-even year of N/A mean?
- N/A means buying never becomes cheaper than renting within the years you compared, or it was already cheaper before year one. Lengthen the horizon or adjust appreciation and rent growth to see the crossover point move.
- Does this account for taxes on the sale or mortgage interest deduction?
- No. Capital-gains exclusions, the mortgage-interest deduction, transaction costs on a future sale, and PMI are not modeled. The comparison is a directional estimate, not tax advice.