Rent vs Buy Calculator
What this rent vs buy calculator does: it follows two households month by month over the same number of years. One buys the home; the other rents and invests the money the buyer puts into the down payment, closing costs, and any higher monthly costs. It shows:
1. Net wealth for each at the end: the buyer’s home equity after selling costs, against the renter’s investment portfolio
2. The break-even year, if buying pulls ahead within your horizon
3. The price-to-rent ratio and the 5% rule, two quick rules of thumb, next to the full simulation
4. A year-by-year table of home value, mortgage balance, and both households’ wealth
Free, no sign-up. Your numbers stay in your browser. It compares money only, with steady rates; results are educational estimates, not financial advice.
Compare long-term net wealth — buying vs renting & investing the difference — with both sides' costs and investments counted
The price-to-rent ratio (home price ÷ one year's rent) is a common rule-of-thumb screen: under 15 is often read as leaning toward buying, 15–20 as a toss-up, and above 20 as leaning toward renting. The 5% rule, another rule of thumb, estimates yearly unrecoverable ownership costs at about 5% of the home's value. Neither is an official standard; the full simulation below uses your own inputs.
| Year | Home Value | Mortgage Bal. | Buying Wealth | Renting Wealth |
|---|
How to use the rent vs buy calculator
1. Pick your currency (25+ supported).
2. Home Purchase: enter the Home Price, Down Payment (%), Mortgage Rate, Loan Term, and Time Horizon (how many years you expect to stay).
3. Rental Alternative: enter the Initial Monthly Rent for a comparable home, Annual Rent Inflation, and the Investment Return the renter’s savings would earn.
4. Costs & Trends: set Property Tax Rate, Maintenance, Home Appreciation, and Selling Costs. Under more options: Buy Closing Costs, Home Insurance, Renters Insurance, HOA / Other, and Capital-Gains Tax on Investments. Blank fields use the grey defaults shown.
5. Results update as you type. Save with Copy Summary, Export CSV, Export PDF, or Copy Shareable Link.
How to read your results
| Result | What it means |
|---|---|
| Financial Advantage | How much more net wealth the leading option has at the end of your horizon. |
| Net Wealth (Buying) | Home value − mortgage balance − selling costs, plus anything the buyer invested in months when renting cost more. |
| Net Wealth (Renting) | The renter’s portfolio: the invested down payment and closing costs, plus each month’s difference, after capital-gains tax. |
| Break-Even Horizon | The first year buying’s net wealth matches or passes renting’s. “Beyond” means it doesn’t within your horizon. |
| Price-to-Rent Ratio | Home price ÷ a year’s rent. A quick screen, not a verdict; the simulation is the fuller answer. |
Worked example: a $400,000 home over 10 years
Here’s one example run through the calculator: a $400,000 home, 20% down, a 6.6% 30-year mortgage, a 10-year horizon; 1.1% property tax, 1% maintenance, 3.5% appreciation, 6% selling costs, 2% closing costs, $1,200 home insurance; 3% rent inflation, an 8% investment return with 15% capital-gains tax, and $300 renters insurance. The only thing changed below is the rent.
| Monthly rent | Price-to-rent | After 10 years | Break-even |
|---|---|---|---|
| $2,000 | 16.7 | Renting ahead by $34,062 | Not within 10 years |
| $2,500 | 13.3 | Buying ahead by $63,009 | Year 5 |
| $2,800 | 11.9 | Buying ahead by $121,251 | Year 3 |
🧮 How this was calculated
- Down payment: $400,000 × 20% = $80,000; closing costs: $400,000 × 2% = $8,000. The renter invests that $88,000 on day one
- Mortgage: $320,000 at 6.6% over 30 years = $2,043.71 a month
- Month 1, owner: $2,043.71 mortgage + about $368 tax + $334 maintenance + $100 insurance ≈ $2,846. Renter at $2,000: $2,000 + $25 insurance = $2,025. The renter invests the ≈ $821 difference
- Year 10, buyer: home worth $400,000 × 1.03510 = $564,240; minus $271,961 mortgage balance and 6% selling costs ($33,854) = $258,425
- Year 10, renter: the portfolio, growing at 8% less 15% capital-gains tax (6.8% a year), reaches $292,487. Difference: $292,487 − $258,425 = $34,062 to renting
Assumptions: steady rates every year · home insurance and renters insurance rise 2.5% a year · no mortgage interest deduction · the renter actually invests every dollar of the difference.
The result turns on the rent. At $2,000 a month, renting comes out ahead; at $2,500, buying does by year 5. Small changes to appreciation or the investment return can move the answer just as much, so it’s worth running a few versions.
Example figures are illustrative, not averages or statistics.
Methodology and sources
1. Monthly simulation: each month the owner’s costs (mortgage, PMI if under 20% down, property tax and maintenance as a share of the current home value, insurance, HOA) are compared with rent plus renters insurance. Whoever pays less invests the difference at the after-tax investment return.
2. Buyer’s wealth: home value − remaining mortgage − selling costs + any invested savings. Renter’s wealth: the portfolio.
3. PMI is modeled at 0.75% of the loan amount per year until equity reaches 20% of the purchase price. Actual PMI depends on the lender, credit, and loan; the CFPB’s Buying a House tools explain mortgage costs.
4. Price-to-rent and the 5% rule are rules of thumb used in housing discussions, not official standards.
5. Not included: mortgage interest and property tax deductions, the capital-gains exclusion on a home sale, moving costs, and rent deposits.
Frequently Asked Questions
1. What is the 5% rule for renting vs buying?
Ans: A rule of thumb that estimates the yearly unrecoverable costs of owning (property tax, maintenance, and the cost of the money tied up in the home) at about 5% of the home’s value. For a $400,000 home, that’s $20,000 a year, or about $1,667 a month, to compare with rent.
2. How does renting and investing the difference build wealth compared to home equity?
Ans: Renters who invest their saved down payment and monthly cash flow differences into low-cost index funds benefit from market compound interest, which historically outpaces average residential real estate appreciation.
3. What is the price-to-rent ratio?
Ans: Home price divided by a year’s rent for a similar home. A $400,000 home renting for $2,000 a month has a ratio of $400,000 ÷ $24,000 = 16.7. Lower ratios are often read as leaning toward buying, higher ones toward renting, but it ignores rates, taxes, and how long you stay.
4. Why does the time horizon matter so much?
Ans: Buying has large one-time costs: closing costs going in and selling costs coming out (6% of the sale price in the example). Those need years of equity growth to recover, so short stays often favor renting and longer stays can favor buying.
5. What does “invest the difference” mean?
Ans: The renter keeps the down payment and closing costs, plus whatever owning would have cost above rent each month, and invests it. The comparison only holds if that money really gets invested; spending it would leave the renter with less.
6. What are unrecoverable costs?
Ans: Money that doesn’t build wealth: for owners, mortgage interest, property tax, maintenance, insurance, and selling costs; for renters, rent and renters insurance. Mortgage principal is different because it becomes home equity.
7. Does this include tax benefits of owning?
Ans: No. The mortgage interest deduction only helps people who itemize, and the home-sale capital-gains exclusion depends on how long you live there. Leaving them out can understate buying slightly for some households.
Kevin Brown researches personal finance topics using official sources; he is not a licensed financial advisor or mortgage lender. Last reviewed: October 2026.
