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Mortgage & Loans
Rent vs Buy Calculator — Should You Rent or Buy a Home?
The honest math behind "throwing money away on rent" vs the hidden costs of owning
"You're just throwing money away on rent" is the most repeated line in American real estate — and it's only half true. Buying a home builds equity, but it also comes with a pile of costs renters never pay: property taxes, homeowners insurance, maintenance, closing costs, and the opportunity cost of locking a big down payment into a house instead of investing it. The honest answer to rent or buy depends almost entirely on how long you'll stay.
This calculator runs both paths side by side over the years you plan to live in the home and tells you which one leaves you with more money — plus the break-even year when buying finally pulls ahead.
How the math works. On the rent side, we total every monthly rent check over your time horizon, growing rent each year by your expected annual increase, and we add the growth your down payment would have earned if you'd invested it instead of buying.
On the buy side, we total your mortgage payments, property tax, insurance and maintenance, then subtract the equity you've built — both the loan principal you've paid down and the home's appreciation. The net cost of owning is: (all cash paid in) − (home value at the end − remaining loan balance).
Worked example. Rent $2,000/mo rising 3%/yr vs a $400,000 home, $80,000 down, 6.5% over 30 years, with taxes + insurance + maintenance of 2.5% of home value per year, 3% appreciation, and a 5% return if you invested the down payment instead. Over 7 years, renting costs about $184,000 in total rent, while buying nets out near $156,000 — all the cash you pour in, plus the ~$32,600 your down payment would have earned invested, minus the roughly $203,000 in equity you build. Buying wins by about $27,000 here and comes out ahead from year one. Change the appreciation or your investment return and the verdict can flip — that's the whole point of running your own numbers.
The mistake almost everyone makes: comparing rent only to the mortgage payment. That ignores the $8,000–$12,000 a year a $400k home quietly eats in taxes, insurance and upkeep — and it ignores the investment return you give up on the down payment. A $2,000 mortgage is not the same as $2,000 rent. This tool counts all of it so you're comparing apples to apples. Treat the results as an estimate for planning, not financial advice.
📖 See also: How to Calculate a Tip (and Split the Bill)
Calculator
Fill in the fields and click "Calculate" for instant results.
📰 Formula
• Net cost of renting = Σ monthly rent over the years you stay (rent grows each year) • Mortgage payment = P × r(1+r)^n / ((1+r)^n − 1), where P = loan, r = monthly rate, n = months • Total buy cash = down payment + mortgage payments + property tax + insurance + maintenance • Opportunity cost = down payment × (1 + return)^years − down payment (gains forgone by buying) • Equity at end = home value × (1 + appreciation)^years − remaining loan balance • Net cost of buying = total buy cash + opportunity cost − equity at end • Break-even = first year where net buy cost ≤ net rent cost
📰 Formula
• Net cost of renting = Σ monthly rent over the years you stay (rent grows each year) • Mortgage payment = P × r(1+r)^n / ((1+r)^n − 1), where P = loan, r = monthly rate, n = months • Total buy cash = down payment + mortgage payments + property tax + insurance + maintenance • Opportunity cost = down payment × (1 + return)^years − down payment (gains forgone by buying) • Equity at end = home value × (1 + appreciation)^years − remaining loan balance • Net cost of buying = total buy cash + opportunity cost − equity at end • Break-even = first year where net buy cost ≤ net rent cost
🧪 Worked examples
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Example 2
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Example 3
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Example 4
⚠️ Common mistakes
- Comparing rent only to the mortgage payment, ignoring taxes, insurance and maintenance.
- Forgetting the opportunity cost of the down payment (what it would earn invested).
- Assuming all of a mortgage payment builds equity — early payments are mostly interest.
- Ignoring how long you'll actually stay; buying rarely wins in under ~3–5 years.
💡 Tips
- The shorter your time horizon, the more renting wins — closing costs need years to recover.
- Maintenance plus taxes and insurance commonly run 2%–3% of the home's value every year.
- Higher expected investment returns on your down payment tilt the math toward renting.
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❓ Frequently asked questions
Is it cheaper to rent or buy a home?
It depends mostly on how long you'll stay. In the first few years renting is usually cheaper because closing costs and slow equity buildup haven't paid off yet. The longer you own, the more buying tends to win — this calculator finds your break-even year.
What is the break-even point for buying a house?
It's the year when the total cost of owning drops below the total cost of renting. For typical U.S. markets it lands somewhere between 4 and 7 years, depending on home price, mortgage rate, appreciation and how fast rent rises.
Why isn't a $2,000 mortgage the same as $2,000 rent?
A mortgage payment is only part of owning. Add property tax, homeowners insurance and maintenance — often $8,000–$12,000 a year on a $400k home — and the true monthly cost of owning is well above the loan payment. Renters don't pay any of that.
What is the opportunity cost of a down payment?
It's the return your down payment could have earned if you'd invested it instead of putting it into a house. An $80,000 down payment growing at 5% a year would become about $112,600 in 7 years, so you give up roughly $32,600 in gains by buying. This calculator adds that forgone gain to the cost of buying so the comparison is fair.
How much should I budget for home maintenance?
A common rule of thumb is 1% of the home's value per year, though older homes can run higher. This calculator lets you set taxes, insurance and maintenance together as a percent of home value — 2%–3% total is typical in much of the U.S.
Does home appreciation make buying always worth it?
No. Appreciation helps, but it competes with the return you'd earn investing your down payment, plus all the carrying costs of owning. If your home appreciates 3% while the market returns 7%, renting and investing can still come out ahead over short horizons.
Should I rent or buy if I might move in 2–3 years?
Usually rent. Closing costs (often 2%–5% to buy and 6%–8% to sell) plus minimal early equity mean a short stay rarely lets buying catch up. Renting keeps you flexible and your cash liquid.
Does this calculator account for the mortgage interest tax deduction?
Not directly — most households now take the standard deduction, so the mortgage interest deduction helps fewer buyers than it used to. Treat the result as a clean before-tax estimate; if you itemize, owning may look slightly better than shown.
Is renting really throwing money away?
Not necessarily. Rent buys you flexibility and frees your down payment to grow elsewhere, while owning quietly spends money on interest, taxes, insurance and upkeep that builds no equity. The right move is whichever leaves you wealthier over the years you'll actually stay.