How to Use the Rent vs Buy Calculator
This calculator computes the true total cost of both options over your chosen time horizon, including often-overlooked factors like the opportunity cost of your down payment, home appreciation, and maintenance. The "true cost" approach prevents the common mistake of comparing rent payments to mortgage payments alone.
What the Calculator Includes
Buying Costs
- Down payment (upfront)
- Closing costs (~3% of purchase price)
- Mortgage principal and interest payments
- Property taxes
- Homeowners insurance
- HOA fees
- Maintenance (1–2% of home value/year)
- Opportunity cost of down payment (invested returns forgone)
- Minus: equity built through payments and appreciation
Renting Costs
- Monthly rent (inflating 3%/year)
- Renters insurance
- Down payment is assumed invested at your investment return rate
The Break-Even Point
The break-even year is when cumulative buying costs (including all upfront costs) equal cumulative renting costs. Before break-even, renting is cheaper; after break-even, buying is cheaper. Most markets show break-even at 4–8 years.
Frequently Asked Questions
It depends on your timeline, local market, and finances. Buying usually wins long-term (10+ years) because you build equity and benefit from appreciation. Renting wins short-term (under 3–5 years) because buying costs are front-loaded with closing costs, maintenance, and transaction fees.
The break-even point is the year when total homeownership costs (including upfront buying costs) equal or fall below cumulative renting costs. After this point, owning becomes financially superior. Our calculator finds this automatically.
Buying costs include: mortgage principal and interest, property taxes, homeowners insurance, HOA fees, maintenance (typically 1% of home value/year), and the opportunity cost of the down payment. Savings come from equity built and home appreciation.
Renting costs include: monthly rent payments and renters insurance. The down payment is assumed to be invested at your chosen investment return rate, growing tax-deferred.
The opportunity cost is the investment return you forgo by putting money into a down payment instead of investing it. If you put $60,000 down, that money could grow at 7% in the stock market. This is counted as a cost of buying in our calculator.
Appreciation builds equity (and wealth) over time, which offsets the high cost of ownership. Historically, US homes appreciate 3–4% annually on average, though local markets vary dramatically. Higher appreciation rates favor buying sooner.
Yes — property taxes are a significant, ongoing cost of homeownership typically ranging from 0.5% to 2.5% of home value annually. Our calculator includes them in the monthly cost breakdown.
Buying is usually not recommended for short stays due to transaction costs. Closing costs (3–6% of purchase price) plus real estate agent commissions (5–6%) at sale mean you need significant appreciation just to break even on a short-term purchase.
Maintenance costs (repairs, replacements, upkeep) typically run 1–2% of home value per year. On a $400,000 home, that is $4,000–$8,000 annually. This is a major hidden cost of ownership that many buyers underestimate.
Yes — adjust the home price, rent, appreciation rate, and property tax rate to match your local market. For expensive markets (NYC, SF), the rent vs buy math often favors renting for 10+ years. For affordable markets (Midwest, South), buying often wins within 3–5 years.