Rent vs Buy Calculator
Compare the total cost of renting versus buying a home over a chosen time horizon.
What is Rent vs Buy Calculator?
This rent vs buy calculator compares the full financial picture of renting versus buying a home over a chosen time horizon — usually 3, 5, or 10 years. It accounts for the mortgage payment, property taxes, maintenance, closing costs on the way in and out, home appreciation, and the rent increases you would pay on the renting side.
The punch line most people miss: in the first few years of ownership, most of your mortgage payment is interest, not principal. If you sell within 3–5 years, you may not build enough equity to cover closing costs.
Formula
Net cost of buying = (down payment + total mortgage payments + property tax + maintenance + buy closing costs) − (sale price × (1 − sell closing %) − remaining mortgage balance).
Net cost of renting = sum of monthly rent over the horizon, with annual increases compounded.
Both figures ignore the opportunity cost of the down payment, tax deductions, and PMI — this is a simplification, not a full tax model.
Worked example
$400k home, 20% down, 6.75% APR, 1.2% property tax, 1% maintenance, 3% appreciation vs $2,200/month rent with 3% yearly increases over 5 years:
- Net cost of buying ≈ $88k (after you sell and pocket appreciation + equity)
- Net cost of renting ≈ $140k (pure expense, no equity)
- Buying saves ~$52k over the 5-year horizon.
How to use this calculator
- Enter the price of the home you are considering and your down payment.
- Enter the mortgage rate you have been quoted and the property tax and annual maintenance estimates for your area.
- Enter an appreciation assumption — U.S. long-term average is about 3–4% per year, though local markets vary widely.
- Enter the monthly rent for a comparable place and how much you expect the rent to rise each year (3% is a reasonable national average).
- Enter the time horizon in years — the answer flips dramatically at shorter vs longer horizons.
Frequently asked questions
What is the 5-year rule?
A common rule of thumb: if you expect to move within 5 years, renting is usually cheaper because mortgage interest, closing costs, and selling costs (typically 6% of sale price in agent commissions) eat into early-year gains. Over 7+ years, buying usually wins.
Why does this calculator not include the mortgage interest deduction?
Most homeowners now take the standard deduction ($15k single / $30k MFJ for 2025), which already exceeds typical mortgage interest on average-priced homes. So the deduction is only meaningful for higher-priced properties or in higher-tax states.
What about the opportunity cost of the down payment?
This calculator does not adjust for what the down payment could have earned if invested instead. If you are saving $80k that would otherwise grow at 7%, that is $27k of foregone growth over 5 years on the buying side. Consider it a margin of safety against the "buying wins" number.
Should I include HOA fees?
Yes, if your target home has them — roll HOA dues into the maintenance percentage. Condos and many planned communities charge $100–$800 per month.