Rent vs. Buy Calculator
Compare the true long-term cost of renting versus buying to find the year at which buying breaks even — and which option builds more wealth over your time horizon.
Assumes 3% buying closing costs, 6% selling costs, 1.2% property tax, 0.5% insurance, 1% maintenance, 7% alternative investment return.
| Year | Cum. Rent | Cum. Buy | Home Value | Buy Advantage |
|---|
How This Comparison Works
This calculator models two parallel scenarios over time and compares net wealth at the end of each year.
Buying path: You spend the down payment and closing costs upfront. Monthly costs include mortgage P&I, property taxes (~1.2%), homeowner's insurance (~0.5%), and maintenance (~1%). Your wealth is the home's appreciated value minus the remaining loan balance and estimated 6% selling costs.
Renting path: You keep your down payment invested at a 7% annual return. Each month you pay rent, which rises at the annual increase rate you specify. Your wealth is the invested down payment minus total cumulative rent paid.
Why the Break-Even Is Often 5–8 Years
Buying involves significant upfront costs — typically 3% to buy and 6% to sell. In the early years, most of your mortgage payment goes to interest, not equity. It usually takes 5–8 years before the equity built plus appreciation overcomes these transaction costs and your opportunity cost.
Key Variables That Shift the Answer
| Variable | Favors Buying | Favors Renting |
|---|---|---|
| Home appreciation | High (4%+) | Low (0–2%) |
| Investment return | Low (4%) | High (8%+) |
| Rent growth | High (4%+) | Low (0–2%) |
| How long you stay | Longer (8+ years) | Shorter (under 5 years) |
Frequently Asked Questions
Is renting "throwing money away"?
No — this is a myth. Rent pays for housing services, just as mortgage interest, taxes, insurance, and maintenance do. The real question is which path builds more wealth given your specific numbers and time horizon.
What assumptions does this calculator make?
Property tax 1.2% of value/year, insurance 0.5%, maintenance 1%, buying closing costs 3%, selling costs 6%, and alternative investment return 7% annually. Adjust the appreciation and rent growth fields to match your market.
