What this calculator does
Renting and buying both cost money. This calculator computes the net cost of each path over a time horizon you choose, then compares them. It counts every dollar out and every dollar back: rent paid, mortgage payments, taxes, insurance, maintenance, the upfront cost of buying, the proceeds from selling at the end, and the investment return a renter earns on the money a buyer ties up in a down payment.
The result is a financial comparison, not a lifestyle recommendation. It does not tell you which is better for your family, your job, your roots, or your peace of mind. What it can do is make the financial case for each option concrete and honest, so the non-financial factors can take their proper place in the decision.
What the inputs mean
- Current monthly rent — what you pay now. If you are comparing a specific rental, use that figure.
- Annual rent increase — how much you expect rent to grow each year. The long-run US average is roughly 3–4% annually, but local markets vary significantly.
- Home purchase price — the price of the home you would buy.
- Down payment % — your down payment as a percentage of purchase price. Below 20% typically triggers PMI, which this calculator does not add to the monthly cost (a limitation stated plainly on the methodology page).
- Interest rate and term — the mortgage note rate and length.
- Property tax rate — annual tax as a percentage of current home value. Find your county's effective rate on your assessor's website; the national average is roughly 1.0–1.1% but ranges from under 0.3% to over 2.5% by state.
- Homeowners insurance — annual premium in dollars. A rough starting point is 0.5–1% of home value annually, but rates vary sharply by location and coverage.
- Annual maintenance — a percentage of home value set aside for repairs and upkeep. The common rule of thumb is 1% annually; older homes or deferred-maintenance properties may run higher.
- HOA dues — monthly dues if the property is in an HOA. Enter zero if none apply.
- Comparison horizon — how many years you plan to stay. This is the most important input after price and rate. Buying is expensive to enter and exit; short stays rarely recover the transaction costs.
- Home appreciation rate — annual appreciation you expect. The long-run US average is approximately 3–4%; recent years have been much higher; some markets are negative. This is the most consequential assumption in the model and the one nobody can know.
- Investment return — the annual return a renter could earn on the money a buyer puts into a down payment and closing costs. A common reference is a broad stock index; historical long-run real returns are around 7% nominally.
- Buying costs — transaction costs at purchase as a percentage of price: closing costs, inspection, moving. Typically 2–5%.
- Selling costs — costs to sell at the end of your horizon as a percentage of value: agent commissions and fees. Typically 6–8%.
A critical limitation to read before using this tool
This calculator does not invest the monthly difference between renting and owning for the renter. If owning costs $800/month more than renting, a disciplined renter who invests that $800 every month does much better than this tool shows. The calculator only invests the initial lump sum (down payment + buying costs) for the renter. This makes the tool more favorable to buying than a complete comparison would be whenever the monthly cost of owning exceeds the monthly cost of renting.
Read the answer with that bias in mind, and consider running the tool at optimistic, central, and pessimistic assumptions for appreciation and investment return. If the conclusion changes sign across those scenarios, the financial case is genuinely close and the decision should rest on other grounds.
Renting
Buying
Assumptions
What the renter earns by keeping the down payment and closing costs invested instead.
Agent commissions, transfer taxes, and prep — the cost of cashing the equity out.
Ledger reads
Comparison$0
difference over the horizon
- Renting, total net cost
- —
- Buying, total net cost
- —
- Monthly P&I payment
- —
- Buying breaks even
- —
- Equity at sale, after costs
- —
- Cash needed up front
- —
How this comparison is built
The renting side adds up every rent payment over your horizon (growing each year), then subtracts the investment gains the renter earns by keeping the down payment and closing costs invested instead of locked in a house. That last part matters: a buyer's cash down isn't free, it has an opportunity cost.
The buying side adds up the down payment, closing costs, every mortgage payment, property tax, insurance, maintenance, and HOA dues over the same horizon — then subtracts what you'd walk away with if you sold at the end: the home's appreciated value, minus selling costs, minus whatever's still owed on the loan. What's left is the true net cost of having owned.
The breakeven year is when buying's net cost first drops below renting's. Short stays almost always favor renting, because closing and selling costs get spread over too few years — that's why the horizon field changes the answer more than almost anything else.
Why does buying look bad for short stays even when rent is high?
Transaction costs. Buying costs roughly 3% going in and 7% or more coming out — around 10% of the home's value that has nothing to do with living there. Stay two years and that's 5% of the price per year, which rent rarely beats. Stay ten years and it fades to noise.
Doesn't this ignore tax deductions for homeowners?
Deliberately, yes. Since the standard deduction was raised, most homeowners no longer itemize, so the mortgage-interest deduction saves them nothing. If you know you'll itemize, the comparison here understates buying slightly — treat it as a conservative baseline.
What appreciation and investment numbers should I use?
Long-run US home prices have grown a little above inflation on average, but with big regional swings; broad stock-market returns have historically been higher, with more volatility. The honest move is to test a range — the defaults here are moderate, and dragging appreciation up or returns down (or vice versa) shows you how sensitive the answer is.
This tool is for general planning purposes only and isn't financial, legal, or lending advice. It can't model your local market, taxes, or life plans — a real decision deserves real quotes and local numbers.
When to use this calculator
Testing how long you need to stay for buying to win
Run the calculator with your realistic inputs, then read the breakeven year. That is the minimum horizon at which buying makes financial sense under these assumptions. If your job might relocate you in three years and the breakeven is year five, the financial case for buying at this price is weak regardless of the long-term numbers.
Stress-testing the appreciation assumption
Run the calculator three times: once with 2% annual appreciation, once with 4%, once with 6%. If buying wins at 2%, the case is robust. If it only wins at 6%, you are betting on a specific market outcome, not making a conservative financial decision.
Comparing two rentals against one purchase
You are deciding between a $2,000/month apartment, a $2,600/month nicer apartment, and a home purchase. Run the purchase against each rent scenario. The $600/month difference between rentals, invested over the horizon, often changes the comparison materially.
Frequently asked questions
Does this include the mortgage-interest tax deduction?
No. Neither the mortgage-interest deduction, the property-tax deduction (subject to the SALT cap), the capital-gains exclusion on a home sale (up to $250,000 single / $500,000 married if you meet the use test), nor the tax on investment returns for the renter are modeled. These cut in both directions and do not cancel out; a tax adviser can quantify them for your situation.
Why does buying look so expensive for short time horizons?
Transaction costs. Buying a home typically costs 2–5% going in and 6–8% coming out — roughly 10% of the home's value that has to be earned back through appreciation and equity before you break even. On a $550,000 home that is $55,000 or more. Short stays do not provide enough time to recover that, which is why the breakeven year is usually in the three-to-seven-year range.
What investment return should I use for the renter?
There is no single right answer. A common reference is a broad US stock index (historical nominal return roughly 7% annually over long periods, higher in recent decades). A more conservative assumption might be 4–5%, reflecting a mixed portfolio or bonds. Run it at both and see whether the conclusion holds. Do not use a number you would not actually earn — the point is to model realistic alternatives.
Does this include PMI?
No. If your down payment is below 20% of purchase price, you will likely pay mortgage insurance on the loan, which adds to the monthly cost of ownership. The calculator notes when your down payment falls below 20% but does not add a PMI premium to the calculation. Add an estimated PMI cost to your monthly maintenance figure as a rough correction if this applies to you.
The calculator says buying is better but I feel like I should rent. What should I do?
Trust your read on the non-financial factors. This calculator produces a financial estimate built on assumptions you cannot know for certain. The quality of schools, your job stability, the flexibility to move, the stress of owning, and the roots that come with a home are all real and none of them appear in this tool. A close financial result means the financial case is roughly neutral and the decision should rest on everything else.
Sources
This calculator is an educational planning tool. Results are estimates based on the inputs and assumptions described on the methodology page. Nothing here is a loan offer, a rate quote, a pre-qualification, or financial advice. Verify every figure against your lender's official Loan Estimate or Closing Disclosure before making any decision.