How the rent vs. buy calculator works
The calculator follows two people with the same budget for the number of years you choose. The buyer pays the down payment and closing costs up front, then the mortgage, property tax, insurance, maintenance and HOA every month. The renter instead invests the down payment and closing costs, pays rent, and invests the difference whenever renting is cheaper than owning. If owning ever becomes cheaper (for example, after rents rise for many years), the buyer invests that difference instead.
What it compares
At the end, the buyer's net worth is the home's value minus selling costs and the remaining mortgage balance, plus any invested savings. The renter's net worth is their investment portfolio. Whichever is larger is the better financial choice under your assumptions. The yearly table shows when the lines cross.
Example
For a $400,000 home with 20% down at 6.5%, 1.1% tax, 1% maintenance, 3% appreciation and 6% selling costs, compared with $2,200 rent rising 3% a year and a 6% investment return, the two paths end up within about $10,000 of each other after 10 years, with renting slightly ahead. Stay longer and buying usually pulls ahead; move after two or three years and renting typically wins because closing and selling costs never get recovered.
Keep in mind
This is a simplified model. It ignores income tax effects such as the mortgage interest deduction and capital gains rules, and real returns are never as smooth as a fixed percentage. Try pessimistic and optimistic assumptions to see how sensitive your decision is.
Frequently asked questions
Is renting throwing money away?
Not necessarily. Owners also have unrecoverable costs — interest, property tax, insurance, maintenance and transaction fees. The question is which set of costs is lower for you.
How long do I need to stay for buying to make sense?
Often five years or more, because buying and selling costs can total close to 10% of the price. Use the "years you plan to stay" field to test your own break-even.
What investment return should I use?
Use a realistic long-run return for how the renter would actually invest the money. A lower figure favors buying; a higher one favors renting.
Does the calculator include tax deductions?
No. Since the standard deduction is large, many homeowners do not itemize, so the model leaves taxes out to keep the comparison simple.
Results are estimates for educational purposes only and are not financial, tax, legal or medical advice. See our disclaimer. Last reviewed 2026-10-22.