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Rent vs Buy Calculator

Compare the true cost of renting vs buying a home. See break-even analysis and year-by-year comparison.

Rent vs Buy Worksheet
Buying costs
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Renting costs
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10-year outcome Renting is Better

Over 10 years, buying comes out ahead if comparable rent is above $2,231/month; below that, renting and investing the difference wins.

Buy total cost$424,575.00
Rent total cost$254,498.00
Break-even rent (over 10 yrs)$2,231/mo
Break-evenN/A
Final home equity$261,997.00
Opportunity cost (down payment growth if invested)$215,595.00

Year-by-Year Comparison

YearBuy CostRent CostHome EquityInvestment PortfolioNet Difference
1 $94,342.00$22,200.00$74,606.00$76,184.00Rent +$15,970.00
2 $131,216.00$45,066.00$92,162.00$95,526.00Rent +$31,764.00
3 $166,748.00$68,618.00$110,450.00$114,192.00Rent +$44,122.00
4 $202,582.00$92,877.00$129,503.00$133,761.00Rent +$56,214.00
5 $238,730.00$117,863.00$149,356.00$154,286.00Rent +$68,048.00
6 $275,203.00$143,599.00$170,047.00$175,823.00Rent +$79,631.00
7 $312,012.00$170,107.00$191,615.00$198,432.00Rent +$90,973.00
8 $349,169.00$197,410.00$214,100.00$222,176.00Rent +$102,085.00
9 $386,686.00$225,532.00$237,545.00$247,123.00Rent +$112,981.00
10 $424,575.00$254,498.00$261,997.00$273,345.00Rent +$123,675.00

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Rent vs Buy: The Complete Picture

This decision involves more than just comparing mortgage to rent. Consider all costs and opportunity costs.

Costs of Buying

  • Mortgage payment: Principal and interest
  • Property taxes: 1-2% of home value annually
  • Insurance: Homeowners insurance required
  • Maintenance: Budget 1-2% of home value yearly
  • Opportunity cost: Down payment could be invested

Benefits of Buying

  • Building equity with each payment
  • Potential home appreciation
  • Tax deductions (mortgage interest, property tax)
  • Stability and control over your space

When Renting Makes Sense

  • Short timeline: Planning to move within 3-5 years. Closing costs (2-5% of purchase price) and selling costs (6-8%) eat into equity quickly
  • Expensive market: When the price-to-rent ratio exceeds 20 (home price ÷ annual rent), renting is often cheaper
  • Job flexibility: Frequent relocation or career uncertainty makes homeownership a liability
  • Limited savings: Buying with less than 20% down adds PMI ($100-300/month) and increases total cost
  • Investment opportunity cost: The down payment could earn 7-10% annually in the stock market vs 3-5% in home appreciation

When Buying Makes Sense

  • Long-term stability: Planning to stay 5+ years gives equity time to build and absorb transaction costs
  • Favorable market: Price-to-rent ratio below 15 means buying is likely cheaper than renting
  • Strong financial position: 20% down payment, stable income, and an emergency fund covering 3-6 months of expenses
  • Tax benefits: Mortgage interest and property tax deductions can reduce your tax bill (though the standard deduction now limits this for many filers)
  • Forced savings: Each mortgage payment builds equity — renting doesn't

Hidden Costs of Homeownership

Monthly mortgage payment is just the beginning. The true cost includes:

  • Property taxes: 0.5-2.5% of home value annually (varies significantly by state)
  • Homeowner's insurance: $1,000-3,000/year depending on location and coverage
  • Maintenance: Budget 1-2% of home value yearly. Roofs, HVAC, plumbing, and appliances all need replacement
  • HOA fees: $200-400/month in condos and planned communities
  • PMI: 0.5-1% of loan amount annually if you put less than 20% down

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Frequently Asked Questions

Is it better to rent or buy a home?

Buying generally makes sense if you will stay 5 years or more; for shorter stays renting usually wins. Buying costs are front-loaded, with closing costs, fees and early payments that are mostly interest, so it takes years of equity growth and appreciation to catch up. Local prices, rent levels, interest rates and investment returns decide where the break-even falls.

What is the price-to-rent ratio?

The price-to-rent ratio is the home price divided by the annual rent for a comparable property. A ratio below 15 generally favors buying, and a ratio above 20 generally favors renting. A $300,000 home that would rent for $1,500 a month has a ratio of about 16.7, in the zone where either choice can make sense.

What is break-even rent?

Break-even rent is the monthly rent at which renting and buying cost the same over a set period, after counting home equity and what a renter could earn by investing the down payment and monthly savings. If comparable rent is above it, buying wins; below it, renting wins. A shorter horizon raises the break-even rent because buying costs are front-loaded.

What hidden costs of buying a home are often forgotten?

Maintenance and opportunity cost are the two most often missed. Maintenance runs about 1% of the home value a year. Opportunity cost is the return the down payment would have earned if invested: $60,000 at 7% a year grows to roughly $118,000 in 10 years. Property taxes, insurance and PMI below 20% down add to the monthly cost.