Rent vs Buy Decision Calculator
1–2% is typical
Usually 2–5%
Agent commission and fees, often 5–8%
What the down payment would earn if you rent
After 7 years
Renting leaves you $76,166 better off
- Buyer's net worth
- $225,031
- Renter's net worth
- $301,197
Within 7 years buying does not catch up. Buying would break even if home prices grew 4.9% a year instead of 3%. Buying and selling cost $53,972 in closing costs and selling fees.
Net worth over time
Monthly costs in year 1
- Rent
- $2,400
- Mortgage (P&I)
- $2,629
- All-in owning cost
- $3,689
- Upfront to buy
- $119,600
Owning cost includes property tax, insurance, maintenance and HOA, which grow with the home's value. Rent paid over 7 years: $220,679; owning costs: $318,288. Not modelled: taxes on investment gains, the mortgage interest deduction (most households take the standard deduction), PMI below 20% down, and moving costs.
Compare buying a home with renting by the net worth each leaves you after the years you expect to stay. The renter invests the down payment, closing costs and any monthly savings; the buyer builds equity as the loan is paid down and the home appreciates, less the cost of selling. The calculator also finds the home price growth at which the two come out even.
Formula
Worked Example
Owning costs $3,689 a month in year 1 against $2,400 of rent, and the renter invests the $119,600 the buyer spends up front at 6%. Buying and selling cost $53,972 in fees. On these numbers buying would only break even if home prices grew 4.9% a year.
Frequently Asked Questions
How long do you need to stay for buying to beat renting?
It depends on the price-to-rent ratio, the mortgage rate and home price growth. Closing costs of 2–5% and selling costs of 5–8% mean buying almost always loses over the first few years. Where homes cost around 15 years of rent, buying often wins within about five years; at 20 or more years of rent it may not win at all. The calculator shows the year buying pulls ahead, if it does.
Why compare net worth instead of rent and mortgage payments?
Part of a mortgage payment is saving (principal), while interest, tax, insurance and maintenance are costs, and a renter can invest the down payment instead. Net worth at the end puts both paths on the same footing: what you would have after selling the house or cashing out the investments.
What is the price-to-rent ratio?
Home price divided by a year's rent for a comparable home. $520,000 ÷ ($2,400 × 12) = 18. Below about 15 tends to favor buying and above about 20 renting, though mortgage rates and growth expectations matter as much.
Common Mistakes
- !Comparing rent with the mortgage payment alone and leaving out property tax, insurance, maintenance and HOA dues.
- !Ignoring the 5–8% cost of selling, which can erase several years of equity.
- !Assuming the down payment would sit idle: a renter can invest it.