Rent vs Buy Calculator

Calculate whether it's more economical to rent or buy a house

Renting

i
Current monthly rent amount you would pay to rent a similar property.
i
How many years you plan to live in the area. Longer periods typically favor buying due to transaction costs and appreciation.

Buying

i
Total purchase price of the home you're considering buying.
i
Check this if you plan to purchase the home without financing (no mortgage loan). This will disable loan-related fields and set down payment to 100%.
i
Cash amount you'll pay upfront. For financing: affects loan amount and monthly payments (typically 10-20%). For all cash: full purchase amount.
i
Annual interest rate for your mortgage loan. Check current market rates with lenders.
i
Length of mortgage in years. Common terms are 15 or 30 years. Longer terms mean lower monthly payments but more total interest.

Costs

▼
i
Monthly cost for homeowner's insurance to protect against damage, theft, and liability. Required by most lenders.
i
Annual property tax rate as percentage of home value. Varies by location - check local rates. Typically 0.5-2.5%.
i
Homeowners Association fees for maintenance of common areas, amenities, and shared services. Enter 0 if no HOA.
i
One-time cost for renovations or improvements you plan to make after purchase.

Growth Rates

▶

Advanced Settings

▶

Results

Enter your values and click Calculate to see the comparison

How to Use the Rent vs Buy Calculator

Step 1: Enter Renting Information

Start with the rental scenario - this sets your baseline:

  • Starting Monthly Rent: Current or expected monthly rent amount for a similar property
  • Time Horizon: How many years you plan to stay in the area (this affects both rent and buy scenarios)
💡 Tip: Time horizon is critical - longer periods typically favor buying due to transaction costs and appreciation.

Step 2: Enter Buying Information

Input the details of the home you're considering purchasing:

  • House Price: Total purchase price of the property
  • All Cash Purchase: Check this if buying without financing (skips loan fields)
  • Down Payment: You can enter either dollar amount or percentage - the calculator syncs both automatically
  • Interest Rate & Loan Term: Current mortgage rate and length (typically 15 or 30 years)
💡 Tip: Get pre-qualified with lenders to know your actual interest rate. The "All Cash" option automatically sets down payment to 100%.

Step 3: Customize Settings (Optional)

Most users can skip these sections, but you can expand them to:

  • Costs: Adjust insurance, property taxes, HOA fees, remodel costs
  • Growth Rates: Modify appreciation, rent increases, investment returns
  • Advanced Settings: Fine-tune tax rates and financial assumptions
💡 Tip: The calculator works well with defaults, but try different scenarios to test sensitivity.

Step 4: Calculate and Interpret Results

Click "Calculate" to see your personalized analysis:

  • Green Result: Buying is cheaper by the amount shown
  • Red Result: Renting is cheaper by the amount shown
  • Cost Breakdown: Click on any cost item to see detailed calculations
  • Share Results: Use the share button to save and share your analysis with all your custom settings
💡 Tip: Try different scenarios! Adjust market expectations or tax assumptions to see how sensitive the result is to your assumptions.

Important Considerations

🏠 What's Included

  • All major financial costs and benefits
  • Tax implications (mortgage interest deduction, capital gains)
  • Opportunity costs of tied-up capital
  • Transaction costs when selling
  • Maintenance costs (configurable, default 1% of home value)

❌ What's Not Included

  • Personal preferences and lifestyle factors
  • Stability and control benefits of ownership
  • Ability to modify your living space
  • Forced savings aspect of mortgage payments
  • Potential for major repairs or market crashes

Ready to Get Started?

For best results, gather recent information about local home prices, rental rates, property taxes, and current mortgage rates before starting.

All input fields include helpful tooltips (ⓘ) to guide you through the process.

How the Calculator Works

Our Methodology

This calculator uses a comprehensive financial model that compares the total cost of renting versus buying over your specified time horizon. It accounts for all major financial factors including opportunity costs, taxes, and market appreciation.

Rent Cost Calculation

  • Monthly Rent Payments: Starting rent escalated annually by your specified increase rate
  • Opportunity Cost: Lost investment returns on rent money using your specified investment return rate and assumed tax rate
  • No Tax Benefits: Rent payments provide no tax deductions

Buy Cost Calculation

  • Mortgage Payments: Principal and interest using standard amortization formula
  • Property Taxes: Based on your specified rate, with configurable annual increases
  • Insurance & HOA: Monthly insurance and annual HOA fees
  • Maintenance: Configurable percentage of home value annually (default 1%)
  • Tax Benefits: Mortgage interest deduction with configurable limits and tax rates
  • Appreciation: Home value growth at your specified appreciation rate
  • Selling Costs: Configurable percentage of home value (default 7%)
  • Opportunity Cost: Lost returns on down payment and monthly housing costs using your specified investment return rate

Customizable Settings

The calculator includes three expandable sections with sensible defaults that you can adjust for your situation:

  • Costs: Insurance, property taxes, HOA fees, maintenance (1% default), remodel costs
  • Growth Rates: House appreciation, rent increases, investment returns, property tax growth (2% default)
  • Advanced Settings: Tax rates (35% investment, 39% mortgage deduction, 20% capital gains), exemption limits ($500K/$750K), selling costs (7% default)

Interpreting Results

Green Result (Buying is cheaper): Buying saves you money compared to renting over your time horizon.
Red Result (Renting is cheaper): Renting saves you money compared to buying over your time horizon.

The calculator shows the financial difference - it doesn't account for personal preferences, lifestyle factors, or the intangible benefits of homeownership.

Frequently Asked Questions

When does buying typically make more sense than renting?

Buying often makes financial sense when:

  • You plan to stay in the area for 5+ years
  • Home prices are reasonable relative to rent (price-to-rent ratio under 20)
  • You have a stable income and emergency savings
  • Interest rates are relatively low
  • You can make at least a 10-20% down payment

What factors favor renting over buying?

Renting may be better when:

  • You plan to move within 3-5 years
  • Home prices are very high relative to rent
  • You prefer flexibility and lower responsibility
  • You can invest the down payment for higher returns
  • You're in an uncertain life situation (job, family, location)

How accurate are these calculations?

The calculator provides a good financial estimate based on the assumptions you input. However, it cannot predict:

  • Future market conditions or economic changes
  • Unexpected maintenance costs or repairs
  • Changes in tax laws or interest rates
  • Personal circumstances that might affect your decision

What's not included in this analysis?

This calculator focuses on financial costs and doesn't account for:

  • Quality of life and personal preferences
  • Stability and control over your living space
  • Potential for rental increases beyond expectations
  • Pride of ownership and community ties
  • Ability to modify or improve your home

How should I choose the investment return rate?

The investment return rate represents what you could earn by investing your down payment and monthly savings difference in the stock market or other investments. Consider:

  • Historical S&P 500 average: ~10% nominal, ~7% inflation-adjusted
  • Conservative estimate: 6-7% for diversified portfolio
  • Your personal risk tolerance and investment strategy
  • Current market conditions and economic outlook

Should I include PMI (Private Mortgage Insurance)?

PMI is required when your down payment is less than 20%. While not explicitly shown as a separate line item, it's effectively captured in the overall cost analysis. For a more precise calculation with PMI:

  • PMI typically costs 0.3-1.5% of loan amount annually
  • Add this to your monthly home insurance amount
  • Remember PMI can be removed once you reach 20% equity

Market Insights & Tips

Understanding Real Estate Markets

Real estate markets vary significantly by location, economic conditions, and time period. Here are key factors to consider:

Price-to-Rent Ratios

A useful metric for comparing markets is the price-to-rent ratio (annual rent ÷ home price):

  • Ratio under 15: Generally favors buying
  • Ratio 15-20: Market dependent, analyze carefully
  • Ratio over 20: Often favors renting

Economic Factors

  • Interest Rates: Higher rates increase borrowing costs, favoring renting
  • Employment Growth: Strong job markets typically support home price appreciation
  • Population Growth: Growing areas see increased housing demand
  • New Construction: High supply can moderate price growth

Timing Considerations

Personal Timing

  • Life Stage: Stability in career, relationships, and location preferences
  • Financial Readiness: Emergency fund, stable income, debt management
  • Time Horizon: Longer stays typically favor buying due to transaction costs

Market Timing

While timing the market perfectly is impossible, consider:

  • Seasonal Patterns: Spring/summer typically see higher prices, more inventory
  • Interest Rate Trends: Rising rates may create opportunities as competition decreases
  • Local Market Cycles: Understanding if your area is in a buyer's or seller's market

Regional Considerations

High-Cost Areas (SF, NYC, DC)

  • Extremely high price-to-rent ratios often favor renting
  • Consider long commutes vs. proximity costs
  • Property taxes and maintenance costs are typically higher

Growing Mid-Size Cities

  • Often offer better price-to-rent ratios
  • Consider long-term growth prospects and job market
  • Infrastructure and amenity development

Rural and Small Towns

  • Lower absolute prices but also limited appreciation potential
  • Consider resale market liquidity
  • Distance to employment centers and amenities

Additional Financial Tips

Beyond the Calculator

  • Emergency Fund: Maintain 3-6 months expenses after home purchase
  • Closing Costs: Budget 2-5% of home price for closing expenses
  • Moving Costs: Factor in immediate move-in expenses and any needed furnishing
  • Inspection & Repairs: Budget for immediate repairs discovered during inspection

Tax Implications

  • SALT Deduction Limits: State and local tax deductions capped at $10K federally
  • Mortgage Interest Deduction: Configurable limit (default $750K of mortgage debt)
  • Capital Gains: Configurable exclusion (default $500K for married couples on primary residence)

Remember: This calculator provides financial analysis only. Your decision should also consider personal preferences, lifestyle factors, and non-financial benefits of homeownership or renting flexibility.