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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
Buy total cost$424,575.00
Rent total cost$254,498.00
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

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?

It depends on how long you'll stay, local market conditions, your finances, and personal preferences. Generally, buying makes sense if you'll stay 5+ years.

What is the break-even point?

The number of years until buying becomes cheaper than renting. It varies based on home prices, rent, and investment returns.

What costs are included in buying?

Mortgage payment, property taxes, insurance, maintenance (1% of home value), and opportunity cost of down payment.

Does home appreciation matter?

Yes, significantly. 3% appreciation on a $400K home is $12K/year in equity gain, making buying more attractive.

What is the price-to-rent ratio?

The price-to-rent ratio is the home price divided by annual rent for a comparable property. A ratio below 15 generally favors buying; above 20 generally favors renting.

What is PMI and when is it required?

Private Mortgage Insurance (PMI) is required when a buyer puts less than 20% down. It protects the lender and typically costs 0.5–1% of the loan amount per year. PMI can be removed once equity reaches 20%.

What is opportunity cost in a home purchase?

Opportunity cost is the return forfeited by using a down payment on a home instead of investing it. A $60,000 down payment invested at 7% annually grows to roughly $118,000 in 10 years — a real cost of buying.

What is home equity?

Home equity is the portion of a property owned outright: the home value minus the outstanding mortgage balance. Each mortgage payment shifts principal from debt to equity, building net worth over time.