Real Estate

Rent vs Buy Calculator

"Buying is cheaper than my rent" only holds if you ignore property taxes, insurance, maintenance, closing costs, and the opportunity cost of tying up your down payment in equity instead of an index fund. This calculator runs the honest comparison: monthly mortgage (P+I), property tax, insurance, maintenance reserves (1% of home value annually), and lost investment returns on your down payment, against rent + 3% annual rent increases. Subtracts tax benefits from itemized mortgage interest + property tax deductions, equity built, and home appreciation. Returns true total cost over your planning horizon and your break-even year — the moment buying overtakes renting in lifetime cost.

Buy beats rent by

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Total rent cost: —
Total buy cost: —
Break-even year: —

The honest math behind rent vs buy

Buying costs that renters skip:

Down payment: 10-20% of purchase price tied up, not earning market returns
Property tax: 0.5-2.5% of home value annually depending on state
Homeowner's insurance: ~0.5% of home value annually
Maintenance reserves: 1% of home value annually (industry rule-of-thumb)
HOA fees: if applicable, $100-500+/month
Closing costs: 2-5% of purchase price when buying
Selling costs: 6-8% of sale price when selling (agent + transfer + repairs)

Buying benefits that renters miss:

Equity built: principal paydown each month accumulates as your asset
Home appreciation: historical ~3% per year in most US markets
Tax deductions: mortgage interest + property tax if you itemize
Stable housing cost: rent goes up annually; mortgage P+I stays flat

Worked example

$350k home, 20% down ($70k), 6.5% rate, 7-year stay, vs $2,000/mo rent.

Mortgage P+I on $280k at 6.5%, 30yr: $1,769/mo. Plus property tax ($350/mo at 1.2%), insurance ($146/mo), maintenance reserves ($292/mo) = $2,557/mo true buying cost. Higher than the $2,000 rent on day 1.

But: equity built over 7 years = ~$32,000. Home appreciation at 3%/year = $80,000 paper gain. Tax savings (itemizing): ~$25,000 over 7 years. So buying side gets credited $137k in returns.

Net: buying wins by about $40-70k over 7 years even accounting for opportunity cost of the down payment. Break-even is typically year 4-5 in this scenario.

How to use this calculator

Current monthly rent: what you pay now (or comparable rental for the area).
Home purchase price: target home cost.
Down payment: typically 10-20% of price.
Mortgage rate: current 30-year fixed rate.
Years to stay: be realistic — average homeowner moves every 7-13 years.
Property tax rate: varies by state (0.5% in HI, 2.5% in NJ).
Income tax bracket: for itemized deduction value.
Output: total rent vs buy cost over horizon + break-even year.

When does each side win?

Rent wins when: staying under 3-4 years; rates are high (8%+); local price-to-rent ratio is over 20; you want career mobility; you don't want maintenance responsibility; you live in a high-property-tax state and won't itemize.

Buy wins when: staying 5+ years; appreciating market; price-to-rent ratio under 15; stable career and life; you want to build equity; you'd save and invest the difference (but most renters don't).

Toss-up zone: 4-5 year horizons in average markets. Comes down to lifestyle preference more than math.

FAQ

When does buying win? +

Usually past year 5-7, assuming home appreciates and you stay put. Closing costs (~3% buying) and selling fees (~7%) eat the first 3-4 years of any equity gains. Past year 5, appreciation and principal paydown typically overtake rent costs significantly.

Why include opportunity cost of the down payment? +

$70,000 sitting as home equity is $70k NOT in an S&P index fund earning ~7% historical returns. Over 7 years, that $70k could grow to $112k (gain of $42k) invested. Real comparison must subtract this opportunity cost from buying's benefit. Without it, calculators show fake savings.

What's the 5% rule? +

Rule of thumb: annual cost of homeownership = ~5% of home value (1% property tax + 1% maintenance + 3% opportunity cost of equity). For a $400k home: $20k/year = $1,667/mo. If rent on a comparable place is below $1,667, renting wins on pure cost. If rent is above, buying wins. Approximate but useful gut-check.

What's price-to-rent ratio? +

Home price ÷ annual rent for comparable property. Under 15: buying favored. 16-20: balanced. Over 20: renting favored. NYC, SF, LA often have ratios 30+. Midwest cities often have ratios 8-12.

What about transaction costs? +

Closing costs: 2-5% of purchase price (loan fees, title, escrow). Selling: 6-8% of sale price (agent commissions, transfer taxes, repairs for sale). These costs eat the first 3-4 years of equity gains. That's why short stays rarely justify buying.

How much should I budget for maintenance? +

1% of home value annually is the industry standard. Newer homes (under 10 years): 0.5%. Older homes (20+ years): 1.5-2%+. Old roof, old HVAC, old plumbing — a single major repair can be $10-30k. Have a real reserve fund.

Should I itemize for the mortgage interest deduction? +

2024 standard deduction: $14,600 single / $29,200 married filing jointly. Itemize only if your mortgage interest + state/local tax (capped at $10k) + charitable donations exceed standard deduction. For most middle-class homeowners with modest mortgages, the standard deduction wins — the "tax benefit" of homeownership is smaller than people assume.

Is buying always the "American Dream" winner? +

No. Buying ties up capital, restricts mobility, and concentrates net worth in one asset. Renting + investing the difference can produce equal or better wealth over decades, especially in expensive coastal markets. Buying is a lifestyle/community/stability choice as much as a financial one — don't let "renting is throwing away money" propaganda override the actual math for your situation.

What if I'm buying as an investment property instead of to live in? +

Different math entirely. Investment property calc cares about: rental income vs PITI (positive cash flow?), tax depreciation deduction (27.5-yr schedule), tenant turnover costs (1 month vacancy per turnover), and capex reserves (5% of rent typical). 1% rule: monthly rent should be ≥1% of purchase price for a property to make sense (e.g., $200k house should rent for $2,000+/mo). Coastal markets fail this rule; Midwest cash-flow markets often pass it.

How does inflation factor in? +

Inflation is a strong long-term tailwind for owners and headwind for renters. Your fixed P&I payment stays the same in nominal dollars while rent rises with inflation (~3% per year on average). After 10-15 years, an owner's effective housing cost relative to income usually drops meaningfully; renter's cost stays at market. Inflation also boosts home values nominally. The 1970s and 2020-22 were extreme examples; the long-run trend is the same direction.

What about HOAs and condo fees? +

An HOA is a recurring cost that doesn't build equity — functionally similar to renting that portion of your housing services (insurance on common areas, exterior maintenance, amenities). A $400/mo HOA on a $300k condo is $4,800/yr — 1.6% of the home value annually, on top of the 5% rule. Run the rent-vs-buy math with HOA included; many condo purchases lose to renting once you account for it honestly.