Rent vs Buy Calculator

Rent vs Buy Calculator

The rent-or-buy decision is one of the biggest financial choices you will make. This calculator compares the total cost of renting against the total cost of buying over your expected timeline, accounting for appreciation, rent increases, tax benefits, maintenance, and opportunity cost of your down payment. The answer depends heavily on how long you plan to stay, your local market, and what you would do with the down payment if you rented instead.

How the Comparison Is Calculated

The calculator builds a year-by-year cash flow model for each option, then computes net wealth at the end of your chosen horizon.

Total cost of buying each year: Monthly mortgage (P&I) + property taxes + homeowners insurance + PMI (if applicable) + maintenance (budget 1% of home value per year) + HOA fees if any + buying transaction costs amortized in — minus equity accumulation and home appreciation.

Total cost of renting each year: Monthly rent (escalating at your chosen annual rate) + renter’s insurance — plus the investment return you earn on the money you would have used for a down payment and the monthly savings (if rent is cheaper than ownership costs).

Break-even year is the year when the buyer’s net wealth position first exceeds the renter’s. Before that year, renting is financially ahead. After it, buying is.

Worked Examples

Example 1 — Austin, TX: close decision, 5-year horizon Home price: $450,000. Down payment: 20% ($90,000). Mortgage at 7.0%: $2,393/month P&I. Property tax (1.8%): $675/month. Insurance: $175/month. Maintenance: $375/month. Total monthly ownership cost: $3,618. Comparable rent: $2,800/month (rising 3% annually). After 5 years, total rent paid: approximately $178,800. Total ownership cost: approximately $217,100. Home appreciated 3% annually to $521,700. Equity built: roughly $111,000. Buyer net position is ahead of renter by about $50,000 at year 5 — but only because of appreciation. If appreciation is 0%, the renter is ahead.

Example 2 — Chicago suburb: buying wins clearly at year 7 Home price: $350,000. Down payment: 10% ($35,000). Loan: $315,000 at 6.75%. Monthly PITI + maintenance: $3,050. Comparable rent: $2,200 (rising 4% annually). Break-even: year 7. By year 10, buyer is ahead by roughly $95,000 due to equity and modest 2.5% annual appreciation.

Example 3 — San Francisco: renting wins for 10+ years Home price: $1,200,000. Down payment: 20% ($240,000). Monthly PITI + maintenance: $9,400. Comparable 2-bed rent: $4,200/month. Rent savings invested at 7% annual return grow to approximately $620,000 over 10 years. Home appreciates 2% annually to $1,464,000. Equity: ~$360,000. Renter’s net position exceeds buyer’s through year 14 in this scenario because the $240,000 down payment and $5,200/month savings generate substantial investment returns that offset foregone equity.

Rent vs Buy Reference Table

Assumes 3% annual rent increases, 1% maintenance, 7% investment return on renter’s savings.

When to Use This Calculator

• When trying to decide whether to renew a lease or make an offer on a home you are considering
• Before relocating for a job, to model whether a 3-year versus 5-year stay changes the math
• When comparing specific markets where ownership costs and rent levels differ significantly
• To stress-test your decision against different appreciation assumptions — 0%, 2%, and 4%
• When evaluating whether to sell your home and rent temporarily during a potential market correction

Common Mistakes

1. Using only the mortgage payment to represent the cost of buying — the full cost of ownership includes property taxes (1%-2.5% of value annually), homeowners insurance ($1,500-$3,500/year), maintenance (1%-2% of value annually), and HOA fees where applicable. On a $450,000 home, these add-ons typically total $1,000-$1,500/month beyond the P&I payment.
2. Assuming appreciation will continue at recent rates — many buyers in 2025-2026 are modeling 5%-8% appreciation based on the 2020-2024 boom. Historically, US home prices have appreciated about 3%-4% annually over long periods. Using aggressive appreciation numbers makes buying look far better than it may actually prove to be.
3. Ignoring transaction costs on both ends — buying costs 2%-5% upfront and selling costs 6%-8%. On a $400,000 home, round-trip transaction costs are $32,000-$52,000. You need years of appreciation and equity just to break even on the transaction itself before any comparison to renting even starts.
4. Forgetting the opportunity cost of the down payment — $80,000 invested in a diversified index fund at a 7% average annual return becomes about $157,000 in 10 years. This is money that would otherwise sit in home equity earning the same return as your appreciation rate. In markets with modest appreciation, this opportunity cost often tilts the decision toward renting.

Current Context for 2026

The rent vs buy math has shifted considerably from 2021. At today’s 7.0% mortgage rates versus the sub-3% rates of 2021, the monthly cost of buying a $400,000 home is approximately $950/month higher for the same loan amount. Meanwhile, rent growth has moderated in many Sun Belt markets after the 2022-2023 surge, with year-over-year rent changes running near 2%-4% nationally in 2025-2026. This means the monthly gap between owning and renting has widened in most markets, pushing the break-even year out to 6-9 years in many cities compared to 3-5 years when rates were low. The decision still favors buying for buyers who plan to stay 8+ years and are in markets with supply constraints, but shorter timelines require careful modeling rather than assuming the conventional wisdom that “buying always wins.”

Tips

1. Run the calculator at three appreciation scenarios — 0%, 2%, and 4% — buying should make sense across all three if you have a 7+ year horizon before you commit
2. Add maintenance at 1.5% of home value per year, not 1% — it is a more realistic long-run average that accounts for roof replacements, HVAC, and appliances
3. If you plan to rent after deciding to buy, invest the down payment savings aggressively rather than leaving them in a savings account — the investment return assumption in the model matters a great deal
4. The 5% rule (home price x 5% / 12 = monthly equivalent cost threshold) provides a fast check: if market rent is below that number, renting may be financially better in the short run
5. Model the effect of moving in year 4 versus year 8 — transaction costs on a short hold are often the single biggest factor against buying

Related Calculations

• Mortgage Calculator — get the exact P&I figure to plug into your comparison
• Property Tax Calculator — estimate the monthly property tax component of ownership cost
• Closing Cost Calculator — quantify the upfront transaction cost that must be recovered before buying breaks even
• Real Estate Affordability Calculator — check whether the purchase you are modeling fits within recommended income ratios