Rent vs Buy Calculator

How do you use this rent vs buy calculator?

Enter your rent, the home you would buy and your loan details, then your best guesses for upkeep, home values, investment returns and how long you will stay. The calculator compares total rent with the net cost of owning over that period and tells you which costs less.

Tips for each input:

• Rent and rent increase: compare with a rental similar in size and location to the home you would buy.
• Price, down payment, rate and term: use real quotes if you have them; treat any rate as an example.
• Tax, insurance and maintenance: use local figures. Older homes often need more upkeep.
• Home value change: test a cautious figure and 0%. This input swings the result most.
• Investment return: what your down payment could earn if you kept renting.
• Buying and selling costs: closing costs when you buy, and agent and transfer costs when you sell.
• Years you plan to stay: the most important input. Short stays favor renting.

How is the comparison calculated?

Renting is the sum of 12 months of rent each year, rising by your rent increase. Buying is everything you pay to own, plus the return you gave up on your upfront cash, minus what you get back when you sell.

Rent total = rent × 12 for each year, with rent rising by your yearly increase.

Net cost of buying = buying costs + down payment + mortgage payments + yearly property tax, insurance and maintenance + lost investment return − sale proceeds.

• Mortgage payment uses M = P × r(1 + r)^n / ((1 + r)^n − 1) on the loan amount.
• Tax and maintenance are figured each year on the home’s rising (or falling) value. Insurance stays at the yearly amount you enter.
• Sale proceeds = future value × (1 − selling costs) − loan balance still owed.
• Lost investment return = (down payment + buying costs) × ((1 + return)^years − 1).

If the two totals are within $1,000, the result is “about the same.”

What is left out: PMI, HOA dues, renters insurance, income tax effects and the return a renter might earn on any monthly savings. Each of these can tip a close result.

What does a worked example look like?

Suppose rent is $2,200 a month and rises 3% a year, and the home costs $400,000 with $40,000 down at an example rate of 6.5%. Over 7 years, rent totals about $202,289 and the net cost of buying is about $199,596, so buying comes out about $2,693 ahead.

That small edge is fragile. With 0% home value growth, renting wins by about $78,175. At an example rate of 7.5%, renting wins by about $22,717. With rent of $1,800 instead of $2,200, renting wins by about $34,087.

How long you stay matters most:

These figures are hypothetical and use example rates. For current national rate averages, see Freddie Mac’s weekly Primary Mortgage Market Survey.

What does your result mean?

The verdict tells you which choice costs less under your assumptions, not which is certain to. Short stays tend to favor renting because buying and selling costs are spread over fewer years. Longer stays tend to favor buying as you pay down the loan and, if values rise, build equity.

Factors outside the calculator can shift the answer:

• Mortgage insurance. With less than 20% down on a conventional loan, the Consumer Financial Protection Bureau notes you will likely pay private mortgage insurance, which raises the cost of buying.
• Taxes. The mortgage interest deduction only helps if you itemize. IRS Publication 936 limits it to interest on the first $750,000 of home debt taken on after December 15, 2017.
• Equity build-up. The CFPB explains that early payments go mostly to interest, so equity grows slowly at first.
• Local markets. Property taxes, insurance and home value trends differ a lot by state and county.

What are the most common mistakes?

These are the assumptions that most often skew a rent vs buy comparison:

• Comparing rent with the mortgage payment alone. Owning also means taxes, insurance, repairs and selling costs.
• Assuming home values always rise. Test 0% and a small decline.
• Ignoring how long you will stay. A job move in three years can turn a good deal into a loss.
• Forgetting the down payment’s lost return. Cash in a house is cash not invested elsewhere.
• Draining savings to buy. The CFPB suggests you track your spending first to know what payment you can handle.

Where should you go next?

To see what you could buy, use the home affordability calculator. For the full monthly cost of owning, including PMI, use the mortgage payment calculator, and estimate cash at closing with the closing cost calculator.

For more help deciding, read how much house you can afford, how much down payment you need and how much closing costs are.