calculators.rentVsBuy
Compare long-term costs of renting versus buying including taxes and appreciation.
Rent vs. Buy Calculator
Down payment amount: $80,000
Annual property tax: $4,800
Historical average: 3-4% per year
Renting Wins
Buying Breakdown (10 years)
Renting Breakdown (10 years)
Year-by-Year Net Worth
| Year | Buying | Renting |
|---|---|---|
| 1 | $-32,097 | $61,400 |
| 2 | $-51,600 | $42,472 |
| 3 | $-70,479 | $23,222 |
| 4 | $-88,707 | $3,657 |
| 5 | $-106,251 | $-16,215 |
| 6 | $-123,080 | $-36,383 |
| 7 | $-139,158 | $-56,837 |
| 8 | $-154,449 | $-77,561 |
| 9 | $-168,915 | $-98,542 |
| 10 | $-182,513 | $-119,761 |
Break-Even Analysis
Renting is better for the entire 10-year period.
High home prices, low rents, or weak appreciation favor renting and investing the difference.
Cost Comparison Over 10 Years
Buying Net Worth
$-182,513
Renting Net Worth
$23,726
US Housing Market Statistics
$412K
Median Home Price
$2,100
Avg Monthly Rent
65%
Homeownership Rate
6-7%
Current Mortgage Rate
Quick Decision Guide
5+ Year Rule
Plan to stay 5+ years? Buying often makes more financial sense due to equity building and closing cost recovery.
20% Down Payment
Avoid PMI insurance by saving 20% down. This can save $100-300/month on a typical home purchase.
28% Rule
Keep housing costs under 28% of gross income. This includes mortgage, taxes, insurance, and HOA fees.
Emergency Fund
As a homeowner, maintain 6+ months of expenses for unexpected repairs, which average $3,000-5,000 annually.
Tax Benefits
Homeowners can deduct mortgage interest and property taxes, potentially saving thousands annually.
Market Timing
Don't try to time the market perfectly. Focus on your personal financial readiness and life circumstances.
Understanding the Rent vs Buy Decision
The decision to rent or buy a home is one of the biggest financial choices you'll make. While buying builds equity and offers stability, renting provides flexibility and lower upfront costs. This calculator helps you understand the true financial impact of both options over time.
The comparison goes beyond simple monthly payments to include opportunity costs, tax benefits, maintenance expenses, and investment returns. Understanding these factors helps you make an informed decision based on your financial situation and long-term goals.
Key Factors to Consider
💰 Total Cost of Ownership
Buying a home involves much more than the mortgage payment:
- • Down payment (typically 5-20% of purchase price)
- • Closing costs (2-5% of home price)
- • Property taxes (0.5-2.5% of home value annually)
- • Homeowners insurance ($800-$2,000+ per year)
- • HOA fees and maintenance (1-2% of home value annually)
- • Mortgage interest (varies with rates and loan term)
📈 Building Equity vs Investing
When you buy, you build equity as you pay down the mortgage and the home appreciates. When you rent, you can invest the money you would have spent on the down payment and the difference between renting and owning costs. The calculator assumes a 7% annual return on investments, which is the historical stock market average.
🏡 Home Appreciation
Historically, home values have appreciated at 3-4% annually, though this varies significantly by location and market conditions. Strong job markets and limited housing supply can drive higher appreciation, while economic downturns can reduce or even reverse appreciation.
⏰ Time Horizon
The break-even point typically occurs after 3-7 years. If you plan to move sooner, renting is often more cost-effective because you avoid transaction costs (closing costs when buying, realtor fees when selling) and have time for appreciation to offset these expenses.
Advantages of Each Option
🏠 Benefits of Buying
- • Build equity with each mortgage payment
- • Fixed monthly payment (with fixed-rate mortgage)
- • Freedom to customize and improve your home
- • Potential tax deductions for mortgage interest
- • Stability and control over your living situation
- • Hedge against inflation as home values rise
- • Forced savings through equity accumulation
🔑 Benefits of Renting
- • Lower upfront costs (just first/last month + deposit)
- • Flexibility to relocate for jobs or lifestyle
- • No maintenance or repair responsibilities
- • No property tax or homeowners insurance bills
- • Can invest savings in higher-return assets
- • No risk of home value depreciation
- • Amenities often included (pool, gym, etc.)
Tips for Making Your Decision
Consider Your Timeline
Plan to stay at least 5-7 years to offset buying and selling costs. If you're uncertain about your location or career, renting provides valuable flexibility without the financial penalties of selling too soon.
Evaluate Your Financial Readiness
Ensure you have 3-6 months emergency fund plus down payment and closing costs saved before buying. Don't stretch your budget to buy if it leaves you without financial cushion for unexpected expenses.
Research Local Market Trends
Markets with strong job growth, limited housing supply, and high rent-to-price ratios favor buying. Markets with declining populations or overbuilding may favor renting. Consider local economic indicators and development plans.
Account for Lifestyle Preferences
Beyond finances, consider your desire for stability vs flexibility, your interest in home improvement projects, and whether you value the freedom from maintenance that renting provides.
Hidden Costs to Remember
Buying: Closing Costs
Typically 2-5% of purchase price including appraisal, inspection, title insurance, and loan origination fees.
Buying: Maintenance Reserve
Budget 1-2% of home value annually for repairs like roof, HVAC, appliances, and unexpected issues.
Selling: Realtor Fees
Typically 5-6% of sale price, which can significantly impact your net proceeds when you sell.
Renting: Moving Costs
First and last month's rent, security deposit, and moving expenses add up when relocating.
Frequently Asked Questions
How long do I need to stay in a home for buying to be worth it?
Most financial experts recommend planning to stay at least 5-7 years to break even on the costs of buying and selling. The exact break-even point depends on your local market, down payment size, and the difference between rent and ownership costs. Use this calculator to find your specific break-even timeline based on your situation.
What if home prices go down instead of up?
Home price declines can significantly impact the rent vs buy calculation. If you buy and prices decline, you could end up "underwater" (owing more than the home is worth) and lose money when you sell. This risk is why it's important to have a long time horizon and only buy when you're financially stable and committed to staying long-term. Renting eliminates this price risk entirely.
Should I include tax benefits when comparing rent vs buy?
Yes, but they're often overestimated. With the higher standard deduction ($27,700 for married couples in 2024), many homeowners no longer benefit from itemizing mortgage interest and property tax deductions. Only consider tax benefits if your total itemized deductions exceed the standard deduction. Consult a tax professional for your specific situation.
Is renting really "throwing money away"?
No, this is a common misconception. Rent pays for housing just like a mortgage, but it also buys flexibility and freedom from maintenance. Additionally, when you buy, you're "throwing away" money on interest, property taxes, insurance, and maintenance—often more than rent in the early years. The key is what you do with the money you save by renting; if you invest it wisely, you can build wealth that rivals or exceeds home equity.
What interest rate should I use for investment returns when renting?
The calculator uses 7% as a default, which represents the historical average annual return of the S&P 500 stock market index adjusted for inflation. Conservative investors might use 5-6%, while aggressive investors might use 8-10%. Remember that investment returns aren't guaranteed and will fluctuate year to year, unlike the steady equity building from mortgage payments.
How accurate is this calculator for my specific situation?
This calculator provides a solid financial comparison based on the inputs you provide, but it can't account for everything. It doesn't include tax deductions, PMI if you put down less than 20%, or personal factors like job security and lifestyle preferences. Use it as a starting point for your decision, then consult with a financial advisor and real estate professional who understand your local market.