Rent vs Buy Calculator
Compare net worth over your planned stay — not just monthly rent vs mortgage
At 7 years, buying leaves you ahead
Year 5
On a $350,000 home with $2,200 per month rent at 6.0% mortgage, buying wins after 5. At your 7-year plan, the $19,806 advantage goes to buying — buyer net worth $153,638 vs renter $133,832 (investing savings at 7.0%).
If you only stay 4 years instead of 7, the gap shifts by $22,983 — Rent looks stronger at shorter horizons.
Price-to-rent ratio is 13.3 (Favors buying).
Rent vs Buy: More Than Monthly Payment
This rent vs buy calculator compares net worth over your planned stay — not just monthly rent versus mortgage payment. Comparing rent to a mortgage payment alone misses most of the math. Buying ties up a down payment, adds closing and selling costs, and carries taxes, insurance, maintenance, and HOA fees. Renting frees that capital to invest — but rent rises over time while a fixed mortgage does not.
A proper rent vs buy analysis compares net worth at your planned exit: home equity minus selling costs versus an investment portfolio built from the down payment and any monthly savings from renting.
The Breakeven Year
The breakeven year is when buying first leaves you with more net worth than renting. Before that point, transaction costs and early mortgage interest dominate. Stays under 5 years often favor renting; stays over 10 often favor buying — but your numbers matter more than rules of thumb.
Adjust "Years You Plan to Stay" to see how sensitive your decision is. If the verdict flips between 5 and 10 years, hold period is your biggest uncertainty.
Opportunity Cost of Your Down Payment
If you rent, the down payment and closing costs can stay invested. If buying costs more per month than renting, that difference can also be invested. The return you assume on those investments — typically 5–7% for a diversified stock portfolio — often determines whether renting wins on paper.
Already decided to buy? Model your mortgage payment schedule with our Loan Amortization Calculator.
Price-to-Rent Ratio: A Quick Market Signal
Price-to-rent ratio divides home price by annual rent. A $400,000 home renting for $2,500 per month has a ratio of 13.3 — below 15, which historically suggests the market may favor buyers who stay long enough. Ratios above 20, common in San Francisco and New York, tilt the math toward renting at almost any horizon under 10 years.
The ratio is a screening tool, not a verdict. Two markets with the same ratio can produce different results depending on mortgage rates, property tax, and your investment return assumption. Use it to calibrate expectations, then run the full calculation above.
What Most Calculators Leave Out
A fair rent vs buy comparison goes beyond mortgage payment versus rent. Buyers pay closing costs (typically 2–5% of home price), property tax, insurance, maintenance (budget 1% of home value annually), HOA fees, and selling costs (5–6%) when they leave. Renters pay rising rent and renter's insurance — but avoid all of those. This calculator models every line item on both sides.
Opportunity cost is the biggest invisible factor. An $80,000 down payment invested at 7% grows to roughly $128,000 in seven years. That $48,000 of foregone growth is a real cost of buying that most simple calculators ignore.
When Renting Actually Wins
Renting wins financially when your stay is short, the market's price-to-rent ratio is high, or you would genuinely invest the savings. Moving within 3–5 years almost always favors renting — transaction costs alone eat 8–12% of the home's value. In high-cost cities where ratios exceed 25, even a 10-year stay can favor renting if you invest the down payment at market returns.
The key assumption is discipline: the renter must actually invest the down payment and monthly savings, not spend them. If you know you would not invest the difference, buying acts as forced savings — and that behavioral advantage can outweigh the math.
Frequently Asked Questions
- How does a rent vs buy calculator work?
- It simulates two paths over your planned stay: buying builds home equity while paying mortgage, taxes, and maintenance; renting pays rising rent while investing the down payment and any monthly savings. At your exit year, it compares net worth — home equity minus selling costs vs investment portfolio value.
- What is the breakeven point for renting vs buying?
- The breakeven year is when buying first leaves you with more net worth than renting. It depends on home price, rent, rates, appreciation, and how long you stay. Use the breakeven marker on the chart — if it's beyond your planned stay, renting wins financially.
- What is price-to-rent ratio and how do I use it?
- Price-to-rent ratio = home price ÷ annual rent. Below 15 often suggests buying may work if you stay long enough; 15–20 is neutral; above 20 often favors renting. It's a market signal, not a verdict — always run your specific numbers.
- Why does how long I stay matter so much?
- Buying has large upfront costs (down payment, closing) and back-end costs (selling commissions). You need time for equity growth and mortgage paydown to overcome those. Moving in 3 years often means renting wins even in "buy" markets.
- Should I invest my down payment if I keep renting?
- Financially, yes — the calculator assumes you invest the down payment and monthly savings at your chosen return rate. In reality, you must actually invest, not spend, those savings for renting to win on paper. If you decide to buy, see our Loan Amortization Calculator for payment details.
- Is renting really 'throwing money away'?
- No. Rent pays for shelter — a real service — and frees capital that can grow elsewhere. If you invest the down payment and monthly savings at 7% annual return, you could build more wealth than a homeowner who bought with a 6% mortgage and 3% appreciation over a 5–7 year horizon. Renting only 'throws money away' if you spend, not invest, what you save.
- What hidden costs of homeownership do most calculators miss?
- Many calculators compare mortgage payment to rent and stop there. A complete comparison adds closing costs (2–5% of home price), selling costs (5–6% in agent commissions), property tax, homeowner's insurance, maintenance (budget 1% of home value per year), HOA fees, and PMI if your down payment is below 20%. This calculator includes all of them and shows how they shift the breakeven year.