Rent vs. Buy Calculator

• Compares total net worth, not monthly cost — the two often point in opposite directions.
• The renter invests the down payment and closing costs they did not spend, at a return you set.
• Transaction costs of roughly 8%–10% across buying and selling are the hurdle appreciation has to clear.
• How long you stay is the single most important input on the page.

How the comparison is run

Most rent-versus-buy comparisons put a rent figure beside a mortgage payment and stop there. That comparison is close to meaningless, because it ignores three things: the money a buyer ties up in a down payment, the costs of ownership that are not the mortgage, and the fact that whoever pays less each month can invest the difference.

This calculator runs both scenarios month by month for the horizon you choose:

• The buyer pays the down payment and closing costs up front, then a mortgage payment, property tax, insurance, maintenance and any HOA dues each month. The home appreciates at the rate you set, the loan amortizes, and equity builds from both directions.
• The renter starts by investing exactly the cash the buyer put into the house — down payment plus closing costs — at the investment return you set. They pay rent, which rises at the inflation rate you set, plus renters insurance.
• Each month, whoever spends less invests the difference. Early on that is usually the renter. Later, as rent rises past a fixed mortgage payment, it is often the buyer.

At the end of each year, the buyer's net worth is calculated as if they sold: home value, less selling costs, less the remaining loan, plus anything they invested along the way. The renter's net worth is simply their portfolio. The break-even point is the first year the buyer's figure overtakes the renter's.

Why transaction costs decide short stays

Buying a house typically costs 2%–5% of the price in closing costs. Selling typically costs 6%–10%, most of it agent commission, with transfer taxes and seller-paid closing costs on top. Combined, that is often 8%–13% of the price, paid in cash, that produces no asset.

On a $450,000 home, that is roughly $45,000 of pure friction. For ownership to beat renting, appreciation plus equity build-up plus any monthly cost advantage has to cover that $45,000 first — and then start winning.

Years to clear transaction costs ≈ (buy cost % + sell cost %) ÷ (annual appreciation % + annual equity build %)

At 3% appreciation and roughly 1.5% of the price building as equity in the early years, a 10% round-trip cost takes somewhere around two to three years just to break even on the friction — before considering that the renter's invested down payment has been compounding the whole time. This is why the conventional advice about staying five years or more exists. It is not arbitrary; it is arithmetic.

The two assumptions that decide the answer

Home appreciation. Over long periods, US house prices have broadly tracked inflation plus a modest margin, but the variation between markets and between decades is enormous. Some metropolitan areas have compounded well above that; others have gone nowhere for a decade or fallen substantially. There is no defensible national number to plug in, and anyone who offers you one with confidence is guessing.

Investment return on the renter's capital. This is what the down payment would have earned if it had not been spent. Set it too high and renting always wins; set it to zero and buying always wins. The number you choose should reflect how that money would genuinely be invested — a cautious investor holding cash is not earning an equity return.

The honest way to use this page is to run it three times: with pessimistic assumptions for buying, with optimistic assumptions for buying, and with your central estimate. If the answer flips between them, the correct conclusion is that the financial case is a wash and the decision should turn on the things a spreadsheet cannot hold — whether you want to stay put, whether you want to control the space you live in, whether you can absorb a $12,000 roof.

The tax treatment of owning, honestly

Mortgage interest and property tax are deductible — but only if you itemise, and itemising only helps to the extent your deductions exceed the standard deduction. Since the standard deduction was raised substantially, the large majority of households take it, which means their mortgage interest produces no separate tax benefit at all.

This calculator handles that correctly. The tax benefit is calculated as:

annual benefit = max(0, mortgage interest
                        + min(property tax + other SALT, SALT cap)
                        + other itemised deductions
                        − standard deduction) × your marginal rate

Leave the marginal tax rate at zero unless you genuinely itemise. If you do, enter your standard deduction (for tax year 2026 that is $16,100 single and $32,200 married filing jointly) and the state and local tax cap, which was raised by the One Big Beautiful Bill Act and rises annually — verify the current figure rather than relying on the default.

One further point that favours owning and is not modelled here: the exclusion on gain from the sale of a primary residence. If you have lived in the home for two of the last five years, a substantial amount of gain can be excluded from capital gains tax. That is a real advantage over a taxable investment portfolio, and it is deliberately left out of this model because it depends on facts specific to your situation.

What the numbers cannot capture

A financial model answers a financial question. It does not answer the whole question.

• Control. A landlord can decline to renew, raise the rent, or sell. An owner cannot be asked to leave.
• Flexibility. A renter can move for a job in thirty days. An owner needs months and pays to leave.
• Forced saving. A mortgage payment builds equity whether or not you feel like saving that month. A renter has to actually invest the difference, and many do not. If you would not reliably invest it, the renting scenario in this calculator overstates your outcome — and you should model a lower investment return to reflect that.
• Maintenance is not just money. It is also time and attention.
• Concentration risk. A house is a single, undiversified, illiquid asset in one location, usually bought with leverage. That is not a criticism — leverage is part of why housing builds wealth — but it is a risk profile most people would not accept in any other asset.

Common mistakes

Comparing rent with the mortgage payment only. Property tax, insurance and maintenance often add 40%–60% on top of principal and interest. The comparison has to be against the full cost of ownership.

Forgetting the opportunity cost of the down payment. $90,000 tied up in a house is $90,000 not invested elsewhere. Over ten years at 6%, that alone is around $70,000 of foregone growth.

Assuming rent stays flat while housing costs rise. Both rise. The advantage of a fixed-rate mortgage is that the principal-and-interest portion does not — but the tax and insurance portion does.

Optimistic appreciation. Using the last few years of a hot market as the forward assumption is the most common way to make buying look better than it is.

Ignoring the stay length. Every other input matters less than this one. A two-year stay almost never favours buying; a fifteen-year stay usually does.

Frequently asked questions