Rent vs Buy Calculator
"Throwing money away on rent" is only sometimes true. Buying has its own unrecoverable costs: mortgage interest, property taxes, maintenance, insurance, and the transaction costs of buying and selling. This calculator compares the net cost of each path over the years you plan to stay, counting the equity you build as an owner against everything ownership costs.
The most important input is how long you will stay. Buying front-loads large one-off costs, so short stays favor renting. Long stays let equity and fixed payments tip the balance toward buying.
What the comparison includes
Cost of renting = Σ monthly rent, rising each year
Net cost of buying = Down payment + Buying costs + Mortgage payments + Taxes + Maintenance − Equity when you sell
Equity at sale is the estimated home value (grown at your appreciation rate) minus selling costs (assumed 6%) minus the remaining loan balance. Buying costs are assumed at 3% of the price. The model simplifies some things: it lumps insurance into maintenance, ignores tax deductions, and does not credit a renter for investing the down payment. Treat the verdict as directional and test how it changes when you adjust the assumptions.
Worked example
Rent of $1,800/month (rising 3%/yr) versus buying a $400,000 home with 20% down at 6% over 30 years, 1.1% property tax, 1.5% maintenance, 3% appreciation, staying 7 years:
| Total rent paid over 7 years | ≈ $165,000 |
|---|---|
| Owner cash out (payments, taxes, upkeep, fees) | ≈ $339,000 |
| Equity recovered at sale | ≈ $178,000 |
| Net cost of buying | ≈ $161,000 |
Buying edges out renting by a few thousand dollars. A 2-year stay, a lower appreciation rate, or one big roof repair flips the answer to renting. Run your own numbers, then stress-test them.
When renting wins, and when buying does
Renting tends to win when you might move within about five years, when homes are expensive relative to rents in your city, when the deposit would empty your emergency fund, or when your income is uncertain. Buying tends to win when you will stay for many years, when a fixed mortgage payment undercuts rising rents, and when you value stability, control over the space, and the forced savings of building equity.
If you lean toward buying, see how extra payments change the picture with the mortgage extra payment calculator. If you are weighing property as an investment, use the rental yield calculator.
Frequently asked questions
Is renting really throwing money away?
No. Rent buys housing, exactly as interest, taxes and maintenance do for an owner. The real question is which path leaves you wealthier after counting equity, and that depends on prices, rates, rents and how long you stay. Over short horizons, renting often wins.
How many years do I need to stay for buying to make sense?
A common breakeven is 5–7 years, because roughly 9% of the home's price goes to buying and selling costs. Fast-rising markets shorten it. Flat markets and high rates stretch it.
What does the 5% rule mean in rent vs buy?
Multiply the home price by 5% (rough annual unrecoverable ownership costs: interest, tax, maintenance) and divide by 12. If comparable rent is below that figure, renting is likely cheaper. Above it, buying likely wins. This calculator does the same comparison with your actual numbers.
Does the calculator include the return I could earn investing my down payment?
No. It ignores opportunity cost, which favors buying slightly. If you are a disciplined investor, add some investment growth on the down payment to the renting side, or reduce the appreciation assumption to compensate.
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Last updated . Formulas are shown on the page and checked against the worked example.
This calculator is for general information and education only. It is not professional advice. Confirm important decisions with a qualified adviser.