Rent vs. buy calculator
Compare housing cash flow under stated assumptions.
- Formula and assumptions shown
- Table and CSV export
- Runs in your browser
How it works
The renter starts by investing the down payment and buying closing costs that the buyer uses up front. The model tracks monthly mortgage payments, annual rent and ownership costs, the mortgage balance, home value, selling costs, and investments from yearly cost differences.
Buyer net worth = horizon home value − mortgage balance − selling costs + buyer investment balance; renter net worth = initial down payment and closing costs compounded with year-end invested housing-cost differences.
At each year end, the side with lower housing cash cost invests the difference under your entered return assumption. This is a scenario comparison, not a universal answer: housing costs, appreciation, investment returns, and the horizon can change the result.
Assumptions
- The renter invests the down payment and buying closing costs at the start; the buyer's down payment becomes home equity and closing costs are spent.
- Mortgage payments are monthly. Property-tax and maintenance percentages use beginning-of-year home value; insurance and HOA stay level.
- Home appreciation, investment return, rent growth, and percentage costs stay constant; the cheaper side invests the annual cash-cost difference at year end.
- Taxes, transaction timing within each year, home repairs beyond entered costs, rate changes, and non-financial preferences are excluded.
Worked example
$120,000 home, $20,000 down, and $2,000 monthly rent
With a 0% one-year mortgage rate, a three-year horizon, and all other costs, growth, appreciation, and investment return set to 0%, the first-year renter invests $20,000 of initial cash plus the $76,000 difference between $100,000 of annual mortgage payments and $24,000 rent. After payoff, the buyer invests $24,000 at each of the next two year ends and has $120,000 of home equity, for $168,000 buyer net worth; renter net worth is $96,000, so buying comes out ahead by $72,000 under these assumptions.
Step by step
- Mortgage payment. The buyer borrows $120,000 − $20,000 = $100,000 at 0% over one year: $100,000 ÷ 12 = $8,333.33 a month, or $100,000 during year one.
- Starting positions. The renter keeps and invests the $20,000 down payment; buying closing costs are 0%, so nothing is added to it. The buyer’s $20,000 becomes home equity.
- Year one. The owner pays $100,000 while rent is $2,000 × 12 = $24,000. The renter invests the $76,000 difference at year end: $20,000 + $76,000 = $96,000.
- Years two and three. The loan is paid off, so the owner’s cash cost is $0 and the buyer invests the $24,000 of rent avoided at each year end: 2 × $24,000 = $48,000.
- Net worth at the horizon. Buyer: $120,000 of home equity (no appreciation or selling costs) + $48,000 = $168,000. Renter: $96,000. Buying comes out ahead by $168,000 − $96,000 = $72,000.
How to read your result
The headline names the side with the higher net worth at the end of the comparison horizon and the gap between them. Buyer net worth at horizon is the home’s value, minus the remaining mortgage, minus selling costs, plus any money the buyer invested in years when owning was cheaper than renting. Renter net worth at horizon is the invested down payment and closing costs plus the money invested in years when renting was cheaper. Selling costs are deducted as if the home were sold at the horizon, which is the fair comparison for someone who moves then but understates owning for someone who stays much longer.
Home equity after selling costs, Buyer investment balance, and Renter investment balance show the pieces behind each total, and Monthly principal and interest is the mortgage payment alone. The yearly table lists annual rent and the owner’s annual cash cost. Part of the owner’s cost is principal, which comes back as equity, so a higher owner cash cost is not all money spent. The chart plots both net worth lines; where they cross is the break-even year under these inputs.
Income taxes are excluded, including the mortgage interest deduction and capital gains rules on a home sale, as are renter’s insurance, moving costs, rate resets, and year-to-year swings in home prices and investment returns. Every rate stays constant, so the result shows the consequence of one set of assumptions, not a forecast.
What changes the result most
- How long you stay
- With the default inputs ($400,000 home, $80,000 down, 6.5% for 30 years, $2,500 rent, 3% appreciation and rent growth, 5% investment return, 6% selling costs), renting comes out ahead by $17,569.57 after 3 years and by $1,119.05 after 5; buying is ahead by $58,324.17 after 10 years and by $292,807.07 after 20. Upfront closing costs and selling costs are spread over fewer years on a short horizon.
- Home appreciation
- At the 10-year default horizon, 2% annual appreciation shrinks the buying lead to $16,506.55, while 4% widens it to $104,161.59.
- Rent and investment return
- Starting rent of $2,200 instead of $2,500 cuts the buying lead to $7,028.09, and a 7% investment return instead of 5% cuts it to $23,151.26, because the renter’s invested down payment grows faster.
- Selling costs
- Setting selling costs to 0% instead of 6% raises the 10-year buying lead from $58,324.17 to $90,578.16. The percentage applies to the whole home value, not just the equity.
Questions
Is buying always better over a long horizon?
No. The outcome depends on the entered price, rent, costs, appreciation, financing, and investment assumptions.
Should I include maintenance?
Include an amount that reflects your scenario. The calculator cannot infer a reliable local maintenance cost.
Does it include taxes?
It includes the property-tax amount you enter, but it does not estimate local tax rules or model income-tax deductions.
Is it better to rent or buy a house?
Neither is better in general. Financially, the answer depends on how long you stay, how the price compares with rent, the mortgage rate, appreciation, and what the renter earns on the cash not spent on a down payment. With the same default inputs, this page shows renting ahead at 3 and 5 years and buying ahead at 10 and 20 years. Stability, flexibility, and responsibility for repairs are real factors the model cannot weigh.
Is a mortgage payment cheaper than rent?
Comparing the mortgage payment with rent leaves out property tax, insurance, maintenance, and HOA dues, which owners pay directly, and the down payment and closing costs paid up front. It also ignores that part of each payment is principal the owner keeps as equity. In the default scenario the $2,022.62 principal-and-interest payment is below the $2,500 rent, yet the owner’s first-year cash cost is $34,871.41 against $30,000 of rent once tax, insurance, and maintenance are added.
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Sources
These references explain the concepts behind the calculation. They do not endorse this site. Estimates leave out any cost or condition you did not enter.