Rent vs Buy Calculator
Compare the long-term cost of renting with buying, including equity, price growth and the return on money you don't tie up.
About the Rent vs Buy Calculator
Buying costs include the down payment's lost investment return, interest, property tax, insurance, maintenance and buying and selling fees; it builds equity and benefits from price growth. Renting has no upfront costs, so the money stays invested. The longer you stay, the more likely buying wins, because transaction costs are spread over more years.
The formula
Net cost = money paid out − value you walk away with (equity after selling, or investment gains)
Worked example
Example: Renting is cheaper by = $196,668
- Inputs: Home price: $440,000; Down payment: 22%; Mortgage rate: 7.2%; Years you'll stay: 8 years; Monthly rent for a similar home: $2,200; Rent increase per year: 3%; Home price growth per year: 3%; Property tax + insurance + maintenance (% of value a year): 2.8%; Buying costs (% of price): 3%; Selling costs (% of price): 7%; Return on savings / investments: 6%.
- Formula: Net cost = money paid out − value you walk away with (equity after selling, or investment gains)
- Result: Renting is cheaper by = $196,668
- Mortgage payment: $2,330
- Home value after: $557,379
Things to keep in mind
- Ignores tax effects such as mortgage-interest deductions and capital gains exclusions; assumes a 30-year mortgage.
Questions people ask
What is the break-even point?
The year when buying's line drops below renting's on the chart.
Is rent dead money?
No more than mortgage interest, tax and maintenance; it buys housing and flexibility.