Rent vs. Buy Calculator
Compare the total financial outcome of renting versus buying a home over time — including what you'd have if you invested your down payment and any monthly savings instead of buying.
Buying
Combined, per month
Renting
Recommendation (7yr horizon)
Buy
Advantage
$10,252
Buy: net worth at horizon
$168,181
Rent: net worth at horizon
$157,929
Recommendation flips in year
6
How it's calculated
The "buy" scenario amortizes your mortgage (using the same math as the Mortgage Calculator) and tracks your home equity as the home appreciates and your loan balance shrinks. At your chosen time horizon, it estimates your net proceeds if you sold — home value minus remaining loan balance minus selling costs.
The "rent" scenario assumes you invest the money you'd otherwise spend buying: your down payment and closing costs are invested as a lump sum, and each month, the difference between what a buyer would pay and your (growing) rent is also invested — so if rent is cheaper than the buyer's payment, you're investing the extra, and if rent is more expensive, that gap comes out of your investment balance instead.
The two scenarios are compared as ending net worth — home equity after selling costs for buying, versus the investment account balance for renting. Whichever is higher at your time horizon is the better financial outcome in this model.
Worked example
A $400,000 home with 20% down, a 6.5% 30-year mortgage, $500/month in combined property tax, insurance, and HOA, versus renting a comparable home for $2,200/month with 3% annual rent growth and a 7% investment return, both compared over a 7-year horizon.
Buying wins by about $10,252 after 7 years in this scenario — but renting was actually ahead for the first 5 years, with buying's advantage only overtaking renting in year 6. This illustrates why the time horizon matters so much: a shorter stay often favors renting, since upfront buying costs and early mortgage interest take years to outweigh rent savings invested elsewhere.
Frequently Asked Questions
- Why does renting sometimes come out ahead financially?
- Buying has large upfront costs (down payment, closing costs) and early mortgage payments are mostly interest, building equity slowly. If you invest the money you'd have spent buying, and especially if you move before several years pass, renting can come out financially ahead — this is the core insight the breakeven year reveals.
- What's the single biggest factor in this comparison?
- Time horizon usually matters most — the longer you stay, the more mortgage principal you pay down and the more your home appreciates, both of which favor buying. Home appreciation rate and investment return assumptions are also highly influential, so try a few different scenarios.
- Does this account for the tax benefits of homeownership?
- No — this calculator doesn't model mortgage interest deductions or other tax effects, which vary by individual tax situation and whether you itemize deductions. Treat this as a simplified financial comparison, not full tax advice.