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What the rent vs. buy calculator compares
Most rent-versus-buy tools compare monthly payments, which misleads because the two payments are not the same kind of money. Rent is spent. A mortgage payment is partly spent (interest, tax, insurance, upkeep) and partly saved (principal). This calculator tracks your total net worth in both paths, so the comparison is between where you would end up, not between two monthly bills.
How it works
Both paths start with the same cash. The buyer uses it for a down payment and closing costs. The renter invests it. Every month the calculator adds up what the buyer pays for the home and compares it with rent. Whoever pays less invests the difference, so both households spend the same total. The home grows at your appreciation rate, rent grows at your rent-increase rate, and investments compound at your chosen return.
How net worth is calculated
Buyer net worth is home value × (1 − selling cost) − loan balance + any investments. Renter net worth is the value of the investment account. The break-even year is the first year the buyer's figure equals or beats the renter's.
Worked example: $400,000 home, $2,300 rent
With 10% down at 6.5%, 1.1% property tax, 1% maintenance and $1,800 of insurance, owning costs $3,125 a month in year 1 against $2,300 of rent. Home prices grow 3% a year, rent 3%, investments 5%. The renter is ahead by $34,561 after one year and $7,634 after seven. Buying pulls ahead in year 9 and leads by about $16,318 at year 10 and $542,585 at year 30.
Change home price growth to 4% and the crossover moves to year 5, with buying $61,044 ahead by year 10. The answer is a range, not a fact.
Judgment calls
Do not skip the small print of buying
Closing costs and selling costs are a big reason buying needs time. Leaving after three years usually means paying both without much equity built. If your plans are uncertain, favor the shorter horizons in the table.
Use real rent, not a guess
Look at listings for homes that truly match the one you would buy. A smaller rental can flatter renting. Check the buyer's monthly cost against your budget on the main mortgage calculator.
Before you decide
Make sure the purchase fits your income with the affordability calculator. If you buy, a lower rate through points calculator or a shorter term changes the break-even, so test those inputs as well.
Estimate only. This model ignores taxes, inflation and mortgage interest deductions, and it assumes steady growth rates that real markets do not follow.
Frequently asked questions
How long do I need to stay for buying to beat renting?
It depends on your inputs, but transaction costs mean it is rarely quick. In the default example, buying pulls ahead in year 9. With home prices rising 4% a year instead of 3%, the crossover moves to year 5. Change the appreciation and rent growth fields and watch the year move.
Why does the renter's net worth start higher?
Because the renter keeps the money a buyer would spend on a down payment and closing costs, and invests it. The buyer starts with less liquid savings and a lot of equity that cannot be spent, and pays selling costs when leaving. Buying catches up as the loan is paid down and the home appreciates.
What costs does the calculator include for buying?
Principal and interest, property tax, insurance, maintenance, HOA dues, closing costs and selling costs. Property tax and maintenance rise with the home's value. It does not model mortgage interest deductions, since most households now take the standard deduction, or inflation.
What return should I assume on investments?
Use a conservative long-run figure rather than a recent market high. The default is 5%. A higher assumption favors renting because the down payment grows faster in the market. A lower one favors buying.
Is this only about money?
No. Buying gives stability, control over the space and protection from rent increases. Renting gives flexibility and no repair bills. The calculator answers the financial question so you can weigh the rest yourself.
Which inputs matter most?
The three that swing the result most are how long you stay, home price appreciation and the rent you would pay for a comparable place. Get the last one from real listings near you, not an estimate.