Rent vs Buy Calculator

It depends on the price-to-rent ratio, how long you stay, interest rates, and how fast prices, rents and investments grow. With a $400,000 home, 6.5% mortgage and $2,300 rent, buying comes out $11,497 ahead after 10 years — but at $2,000 rent, renting is $43,832 ahead over the same period. Enter your own numbers rather than relying on a general answer.

A rule of thumb popularised by Ben Felix of PWL Capital: the yearly unrecoverable cost of owning is roughly 5% of the home's value (about 1% property tax, 1% maintenance and 3% cost of capital). Multiply the price by 5% and divide by 12; if you can rent a similar home for less, renting may be the better deal. For a $400,000 home that's $1,667 a month. Each of those three figures varies a lot by place and over time, so treat it as a quick screen, not a verdict.

Money tied up in a down payment and closing costs can't be invested elsewhere. The calculator assumes the renter invests that cash, and that each month whichever option is cheaper invests the difference. In the example, the renter's investments earn $89,353 over 10 years. Set the return to 0% and buying comes out $100,850 ahead instead of buying by $11,497.

Buying has big one-off costs — closing costs when you buy and selling costs when you leave — that only pay off as equity builds and the home's value grows. In the example, buying starts $36,000 behind on day one. After 3 years, renting is $27,012 ahead; buying pulls ahead in year 9. If you might move within a few years, renting often wins.

It's the starting monthly rent at which renting and buying come out exactly even over your horizon, with every other input unchanged. The calculator finds it by bisection. For the example it is $2,237 a month: rent below that and renting comes out ahead; above it, buying does.

Both matter, and they compound over time. Small changes in home price growth or investment return swing the result a lot over long horizons: raising the investment return in the example from 6% to 8% turns the result into renting ahead by $29,331. Try a pessimistic and an optimistic set of rates to see how sensitive your decision is.

Only if you'd itemize deductions and your itemized total would beat the standard deduction. In the US most households take the standard deduction, so the deduction often saves nothing. The option is off by default; when on, it saves your marginal tax rate times the interest and property tax you pay, ignoring the standard deduction and any caps, so it overstates the benefit for many people.

The home price divided by a year's rent for a similar home. A $400,000 home that would rent for $2,300 a month has a ratio of 14.5. A common rule of thumb says a ratio under about 15 leans toward buying and over about 20 toward renting, but it ignores interest rates and how long you stay, which this calculator includes.

For buying: the down payment, closing costs, mortgage payments, property tax, home insurance, maintenance, HOA dues and selling costs at the end, set against the equity you build. For renting: rent with yearly increases, renter's insurance and the security deposit, which is returned at the end. Each side's spare cash is assumed to be invested.

Taxes on investment gains and on the profit from selling a home, private mortgage insurance, refinancing, moving costs, and the non-money reasons people buy or rent — stability, flexibility, control over the home. Growth rates are held steady, while real prices, rents and returns move around year to year. It's an estimate, not financial advice.

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