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Rent vs Buy Calculator
Compare where you would stand financially after renting or buying for the same number of years, counting every cost and what your money could earn elsewhere.
How we compare renting and buying
We follow two versions of you for the same number of years, both spending the same amount each month:
- The buyer pays the down payment and closing costs, then each month the mortgage, property tax, insurance, maintenance and HOA. At the end they sell, pay selling costs and keep what's left after paying off the loan.
- The renter invests the down payment and closing costs instead. Each month, if owning costs more than rent, the renter invests the difference; if rent costs more, the buyer invests the difference.
Whoever ends with more wealth made the better financial choice. Home value grows at your home price growth rate, rent rises each year, and investments grow at your investment return.
Example: $400,000 home vs $2,200 rent
With 20% down at 6.5%, the mortgage payment is $2,022.62, and with tax, insurance and maintenance owning costs about $2,870 a month at first, versus $2,200 rent. After 7 years the renter is ahead by about $24,000. Buying only pulls ahead after about 13 years. If the same home would rent for $2,600, buying wins after about 5 years.
What tips the balance
- How long you stay. The 8% to 10% round-trip cost of buying and selling takes years to recover.
- Price-to-rent ratio. Expensive cities with relatively cheap rent favour renting.
- Interest rates. A 1-point lower mortgage rate makes a big difference to the monthly cost.
- Discipline. Renting only wins if the renter actually invests the difference.
Non-financial reasons matter too: stability, freedom to renovate, or flexibility to move for work.
Frequently asked questions
Is it better to rent or buy?
It depends mostly on how long you stay and how rents compare with ownership costs where you live. Buying has high one-time costs (closing and selling costs of roughly 8% to 10% combined), so it usually needs several years to beat renting.
What is the price-to-rent ratio?
Home price divided by a year's rent for a similar home. Below about 15 buying tends to win; above about 20 renting tends to win. A $400,000 home that would rent for $2,200 a month has a ratio of about 15.
Isn't rent just throwing money away?
No more than mortgage interest, property tax, insurance and repairs, which are the unrecoverable costs of owning. What matters is whether those costs, minus home price growth, are lower than rent, and what your down payment could have earned invested elsewhere.