Rent vs. Buy Calculator

How this calculator compares renting and buying

This calculator takes a total-cost approach: it adds up every dollar paid under each option over your chosen comparison period, then adjusts for the wealth effects unique to each path.

For buying, the total cash outflows are mortgage principal and interest (computed using the standard PMT amortization formula), property taxes, homeowners insurance and closing costs. From that total, the calculator subtracts the equity you accumulate: the principal you have repaid plus any appreciation in the home's value. The result is the net cost to buy.

For renting, total rent paid grows each year by the annual rent increase rate you specify. The calculator then subtracts the investment gains your down payment would have earned if invested instead of used for a purchase. The result is the net cost to rent.

The option with the lower net cost over your chosen period is shown as the better financial choice. When the two figures are within 5% of each other the result is shown as "About equal," because small changes in assumptions can reverse the outcome.

Worked example (default values)

Monthly rent $1,800, home price $350,000, 20% down ($70,000), 6.5% rate, 30-year term, 10 years:

1. Loan amount = $350,000 - $70,000 = $280,000
2. Monthly P+I (PMT formula): r = 6.5/12/100 = 0.005417; n = 360; PMT = 280,000 x 0.005417 x (1.005417)^360 / ((1.005417)^360 - 1) = $1,769.90
3. Mortgage paid over 10 years = 120 x $1,769.90 = $212,388
4. Property taxes (1.1% x $350,000 x 10 years) = $38,500
5. Insurance ($1,800/yr x 10) = $18,000
6. Closing costs (3%) = $10,500
7. Principal repaid after 10 years (from amortization) = approx. $39,700
8. Home value after 10 years at 3%/yr = $350,000 x 1.03^10 = approx. $470,200; appreciation gain = $120,200
9. Total equity = $39,700 + $120,200 + $70,000 (down payment recovered) = approx. $229,900
10. Net cost to buy = $212,388 + $38,500 + $18,000 + $10,500 - ($229,900 - $70,000) = approx. $120,000 (net of down payment recovery)
11. Total rent over 10 years at 3%/yr growth = approx. $245,400
12. Investment gains on $70,000 at 6%/yr over 10 years = $70,000 x (1.06^10 - 1) = approx. $55,400
13. Net cost to rent = $245,400 - $55,400 = approx. $190,000

Under these assumptions, buying costs less over 10 years. Adjust the inputs to reflect your local market.

Understanding the assumptions

Three inputs are labelled as assumptions because they are forecasts, not known facts. Small changes to any of them can shift the result significantly. Always test a range of values.

Home appreciation rate (default 3%/yr). The long-run US average is often cited near 3 to 4% nominal, but this varies enormously by city, neighborhood and decade. In high-demand markets appreciation has exceeded 6% annually; in declining markets home values have fallen. The CFPB's homebuying resources do not provide a forecast, and neither does this calculator.

Annual rent increase (default 3%/yr). Rent growth is highly local and cyclical. Some markets have seen rents fall in recent years; others have risen sharply. If you are in a rent-controlled apartment, your increase may be capped by law. Set this to reflect your realistic expectation.

Investment return on down payment (default 6%/yr). This represents what you could earn by investing the down payment instead of using it for a purchase. A 6% real return is a common planning assumption for a diversified stock portfolio over a long horizon, but actual returns vary and may be negative in any given period. Set this to match your actual investment plan and risk tolerance.

This calculator does not model maintenance costs (a common rule of thumb is 1% of home value per year), selling costs (typically 5 to 6% in agent commissions plus transfer taxes), or the tax deductibility of mortgage interest, which is limited to itemizing filers. For a comprehensive analysis, consult a fee-only financial planner.