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Rent vs. buy calculator guide

This calculator compares the financial outcome of renting a home with buying one. It gives both choices the same starting resources and monthly housing budget, then asks which choice leaves more net worth at the end of the stay.

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What it calculates

The calculator runs one equal-resources comparison. Renting uses rent, renters insurance, utilities, and a refundable security deposit. Buying uses a fixed-rate mortgage, property tax, homeowners insurance, maintenance, utilities, transaction costs, and optional PMI and HOA dues. Money that either choice does not use is invested.

At the end of every whole year, the model treats the renter as leaving the rental and the buyer as selling the home. It applies the tax assumptions, returns the rental deposit, subtracts the mortgage and selling costs, and compares the two resulting net-worth figures in today’s dollars.

This is a comparison, not an affordability test. It does not decide whether a lender will approve a mortgage, whether the monthly payments fit an emergency budget, or which home better suits a household.

Questions it answers

Which choice finishes ahead?

The headline compares renter net worth with buyer net worth after the expected stay. The advantage is the dollar gap between them, not the total value of the home or portfolio.

When does buying stay ahead?

Lasting break-even is the first whole year when buying catches renting and remains at least level through every later year the model runs. A one-year crossover that later reverses is not reported as break-even.

What creates the difference?

The charts separate home equity, mortgage balance, invested savings, annual cash costs, and unrecoverable costs so you can see whether appreciation, investment growth, financing, or transaction costs drive the result.

Equal-budget comparison

Start: Both choices receive the same available cash up front and the same housing budget each month.

Renting branch

Pay rent, renters insurance, and renter utilities. Invest the unused upfront cash and any part of the monthly budget left over. Add the returned security deposit at the end.

Buying branch

Pay the down payment, purchase costs, mortgage, and ownership expenses. Invest any monthly budget left over. At the end, sell the home and subtract selling costs, tax, and the mortgage.

Finish: Compare after-tax investments plus the returned deposit with after-tax investments plus net sale proceeds, on the same date.

Major inputs

Monthly rent and yearly increase
The first year’s rent and the assumed annual change beginning in year two. The increase is an assumption, not a forecast.
Purchase price and down payment
The home price and cash paid toward it at purchase. The difference becomes the original mortgage.
Mortgage rate and term
The fixed annual interest rate and original repayment period used to calculate principal and interest.
Expected years in the home
The exit year used for the headline comparison. Because buying and selling have large one-time costs, changing the stay can materially change the answer.
Home appreciation
The assumed yearly change in home value. A negative value models depreciation.
Investment return
The assumed yearly return on money either strategy invests. It is uncertain and should be tested at several plausible rates.
Ownership costs
Property tax, maintenance, homeowners insurance, utilities, HOA dues, PMI where applicable, basis additions paid at purchase, and separate cash-only purchase costs. Basis additions include qualifying improvements and acquisition costs such as transfer taxes, recording, surveys, and owner title insurance; loan and occupancy costs remain cash-only.
Renting costs
Renters insurance, utilities, and the security deposit. The model returns the deposit in full without growth.
Purchase and selling costs
One-time costs entered as percentages of the purchase price and future sale value.
Inflation and taxes
Inflation converts results to today’s dollars and raises specified fixed costs. The tax fields are effective rates supplied by you, not a tax-return calculation.

What the results mean

Higher net worth and net-worth advantage
The choice with more ending net worth and the absolute dollar difference between the two. A narrow lead is especially sensitive to assumptions.
Lasting break-even
The first whole year from which buying remains at least level with renting through the rest of the projection. “Not reached” means no lasting crossover occurred within the modeled period.
Effective monthly economic cost
The opportunity cost of each choice, spread over the months elapsed. It includes wealth that the same resources could otherwise have built, so it is not the same as the cash leaving your bank account each month.
Renter portfolio
The renter’s investment account after the assumed tax on positive gains. Renter net worth adds the returned security deposit.
Home equity
Estimated home value minus the mortgage balance. It is a balance-sheet figure before selling costs and any modeled home-sale tax.
Net sale proceeds
Estimated sale price minus selling costs, the remaining mortgage, and modeled home-sale tax. Buyer net worth adds any separate buyer investment portfolio.
Unrecoverable costs
Costs that do not create an asset: rent and renter expenses on one side; mortgage interest, taxes, insurance, upkeep, utilities, PMI, and transaction costs on the other. Mortgage principal is excluded because it builds equity.

Read the headline together with the year-by-year chart. The strategy with higher ending net worth depends on the entered assumptions; the path shows whether the lead is stable or depends heavily on one exit date.

Worked example

Hypothetical: $2,500 rent or a $400,000 home

Suppose monthly rent and the security deposit are both $2,500, rent rises 3% a year, and the alternative is a $400,000 home with 20% down, a 6.5% 30-year mortgage, and a ten-year stay. Assume 3% yearly home appreciation, 7% investment return, and 2.5% inflation.

Keep these additional assumptions: 1.1% property tax, 1% maintenance, $2,400 yearly homeowners insurance, $20 monthly renters insurance, $200 renter and $300 owner monthly utilities, 3% cash-only purchase costs, 6% selling costs, and 15% tax on positive investment gains. Assume no HOA dues, basis additions at purchase, homeowner tax savings, or home-sale gains tax.

Renting net worthAbout $168,870
Buying net worthAbout $182,823
Buying advantageAbout $13,953 after ten years
Lasting break-evenYear 8

The effective monthly economic cost is about $3,277 for renting and $3,160 for buying. Buying leads in this scenario, but the gap is small enough relative to a home purchase that different appreciation, investment return, repairs, selling costs, or move timing could reverse it. Duplicate the scenario and change one uncertain assumption at a time.

Assumptions and limitations

  • Both choices begin with the same available cash and receive the same monthly budget. This isolates the financial tradeoff; it does not model different lifestyles, homes, or borrowing eligibility.
  • Results are in today’s dollars. Home value, investment return, rent growth, and inflation follow smooth rates, while real markets and expenses vary from year to year. The Consumer Financial Protection Bureau recommends testing different scenarios because these assumptions can materially affect a calculator’s result.
  • The mortgage is fixed-rate. Property tax changes with modeled home value; specified insurance, HOA, and utility costs rise with inflation after year one.
  • The model does not create tax rules from filing status. Enter effective tax and homeowner-savings rates that fit the scenario, and consult the current IRS home-sale guidance or a qualified professional for an actual sale.
  • Maintenance is a smooth percentage, not a schedule of repairs. Emergency cash needs, financing availability, and the value of flexibility or ownership are outside the calculation.
PMI follows a scheduled automatic-termination baseline. The calculator determines at origination whether the down payment is below 20%, then charges borrower-paid PMI only until the scheduled mortgage balance reaches 78% of the original purchase price or the month after the amortization midpoint, whichever comes first. Purchase price is used as the original-value proxy. Modeled appreciation cannot cancel it early, depreciation cannot start or restart it, and the calculator does not model borrower-requested 80% cancellation or appraisal rules. FHA, VA, lender-paid, and other loans can follow different rules. See the CFPB’s PMI guidance and your loan documents.

Calculations are estimates for planning and education, not personalized financial, tax, legal, or investment advice. Actual results may differ. Read the Financial Disclaimer.

Sources and further reading

Sources reviewed August 2026. These sources explain concepts and U.S. rules; they do not endorse this calculator or its assumptions.

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