How we compare renting and buying
The calculator follows two households month by month for the years you enter:
- The buyer pays the down payment and closing costs up front, then the mortgage (and PMI while it applies), property tax, insurance, and upkeep. At the end they sell, pay selling costs, pay off the loan, and keep the rest.
- The renter pays rent, which rises each year. They invest the cash the buyer put into the down payment and closing costs, and in any month renting costs less than owning, they invest the difference. (In months when owning costs less, the buyer invests the difference instead.)
At the end we compare what each household has: the buyer's sale proceeds plus any investments, against the renter's investments. The gap is the result. "Net cost" in the breakdown is the same comparison written as money out minus money back.
The investment return matters more than people expect. Money tied up in a down payment can't earn anything else, and leaving that out makes buying look better than it is, especially over short stays.
Default assumptions
You can change every one of these in the calculator: the investment return sits with the main inputs, and the rest are under Assumptions. Property tax, insurance, and maintenance rise with the home's value each year, and mortgage payments stop once the loan is paid off.
| Assumption | Default |
|---|---|
| Rent increase | 3% a year |
| Home value growth | 3% a year |
| Investment return | 5% a year |
| Property tax | 1.1% of value a year |
| Home insurance | 0.6% of value a year |
| Maintenance | 1% of value a year |
| Closing costs to buy | 3% of price |
| Selling costs | 6% of sale price |
| PMI (under 20% down) | 0.75% of loan a year |
| Loan | 30-year fixed |
Worked example
$2,200 a month in rent against a $400,000 home with $80,000 down (20%) at 7%, using the default assumptions:
| Years you stay | Result |
|---|---|
| 3 years | Renting ahead by $35,760 |
| 7 years | Renting ahead by $30,049 |
| 12 years | Renting ahead by $10,845 |
| 20 years | Buying ahead by $63,505 |
Under these assumptions, buying pulls ahead after about 14 years. Short stays favor renting because about 9% of the home's value goes to buying and selling costs, and the down payment gives up years of investment growth.
What this estimate leaves out
- Income taxes: the mortgage interest deduction, the tax break on selling a main home, and taxes on investment gains.
- Renter's insurance, moving costs, and HOA dues.
- Changes in rates or prices along the way. Real markets don't grow at a steady rate.
- Everything that isn't money: stability, flexibility, and whether you want to own.
Thinking about a specific house? The affordability stress test (sign-in required) is a free beta that shows whether it still works if rates, taxes, or your income change.
Frequently asked questions
Is it better to rent or buy right now?
It depends on how long you'll stay, local prices and rents, your mortgage rate, and what your down payment could earn otherwise. There's no single answer for everyone, which is why this calculator lets you change every assumption. Try your own numbers and watch how the result shifts with the number of years.
How long do I need to stay for buying to come out ahead?
It varies a lot. In the example on this page ($2,200 rent against a $400,000 home with 20% down at 7%), buying pulls ahead after about 14 years. Buying and selling costs are a big reason: about 9% of the home's value goes to transaction costs, and it takes years of equity growth to cover them. Higher rents, faster price growth, or a lower rate shorten the wait.
Why does the calculator count investment returns for the renter?
Because the down payment and closing costs, plus any monthly savings from renting, could be invested instead. Leaving that out makes buying look cheaper than it really is. The default is 5% a year; set it to 0% to see the result without it.
What costs of owning do people forget?
Maintenance and repairs (1% of the home's value a year is a common rule of thumb), property tax and insurance that rise with the home's value, PMI with less than 20% down, and the 6% or more it can cost to sell. Closing costs to buy add another 2% to 5%.
Does this include the tax benefits of owning?
No. Most households take the standard deduction, so the mortgage interest deduction often doesn't help. Profit on selling your main home is usually tax-free up to $250,000 ($500,000 for married couples) if you've lived there two of the last five years, and investment returns may be taxed. A tax professional can tell you whether these change the answer for you.
Go further
- Buyer CheckA realistic budget from your income, debts, credit, and down payment, with a pre-approval checklist.
- How much house can I afford?The home price that fits the 28/36 guideline, with taxes, insurance, and PMI.
- How to read a Loan EstimateWhat each section of a lender's quote means once you start shopping.
- See a sample reportWhat a Mortgage Lens report looks like before you buy one.
More free calculators
- Mortgage payment calculatorYour full monthly payment: principal, interest, property tax, insurance, PMI, and HOA dues.
- How much house can I afford?The home price that fits the 28/36 guideline, from your income, debts, and down payment.
- Refinance break-even calculatorYour new payment, when closing costs pay for themselves, and whether you come out ahead.