Rent vs Buy Calculator
Find the year buying overtakes renting, using the figures most comparisons leave out: selling costs, rent increases, maintenance and what your deposit could have earned invested.
Your details
Why the usual comparison is wrong
The rent versus buy question is normally answered by comparing a mortgage payment with a rent cheque, and that comparison is close to useless. It ignores that a mortgage payment builds equity, that ownership carries costs a tenant never sees, that selling a house costs money, and that the deposit is capital that could have been earning a return somewhere else.
This calculator models both paths properly. The buyer pays the mortgage plus ownership costs and accumulates equity in a home that appreciates. The renter pays rent that rises each year and invests the deposit plus any monthly difference between the two options. At the end, the buyer's equity is the home value less the remaining mortgage and less the cost of selling, and the renter's is the investment portfolio. The gap between them is the answer.
On the default figures here, a 400,000 dollar home with 80,000 dollars down against 2,000 dollars a month rent, renting comes out roughly 10,000 dollars ahead after ten years. Buying only overtakes renting at around year fourteen. That surprises people who assume owning always wins, but it follows from the arithmetic: the buyer hands over 80,000 dollars on day one while the renter keeps it invested, and six percent of the sale price disappears in agent commission and closing costs when the buyer sells.
The two inputs that change the answer most are how long you stay and how fast rents rise. Buying is a bet on time: the transaction costs are fixed, so they are spread over more years the longer you hold. Buy for two years and the costs almost guarantee a loss; buy for fifteen and the maths usually favours owning. Try both ends of the horizon selector to see how sharply the answer moves.
How the comparison is calculated
Both paths are simulated month by month for the period you choose, then the two end positions are compared.
| Symbol | Meaning |
|---|---|
Value |
The home's value at the end of the period, after appreciation |
selling costs |
Agent commission, transfer taxes and closing costs, modelled at 6 percent |
Mortgage |
What is still owed on the loan at the end |
Deposit grown |
The down payment invested at your assumed return instead of being spent |
The renter is credited with investing the difference whenever the monthly cost of owning exceeds the rent. Without that, the comparison would penalise the buyer for spending money the renter simply keeps. Growth rates are compounded monthly rather than divided by twelve, which matters over a long horizon.
Worked example: 400,000 dollar home against 2,000 dollar rent
80,000 dollars down, 6.5 percent over 30 years, 3 percent rent growth, 3 percent appreciation, a 7 percent return on investments, and 9,000 dollars a year of ownership costs, held for 10 years.
| Figure | Result |
|---|---|
| Monthly mortgage payment | $2,022.62 |
| Monthly ownership costs | $750.00 |
| Total monthly cost of buying | $2,772.62 |
| Monthly rent | $2,000.00 |
| Extra cost of buying each month | $772.62 |
| Home value after 10 years | $537,567 |
| Mortgage still owed | $271,284 |
| Buyer's equity after selling costs | $234,029 |
| Renter's investment portfolio | $244,250 |
| Difference | −$10,221 (renting ahead) |
After ten years the renter is about 10,221 dollars ahead. The buyer has 234,029 dollars of equity, which sounds like a lot until you notice the renter has 244,250 dollars invested, having started with the same 80,000 dollars and added 772 dollars a month. Lengthen the period to thirty years and buying wins by a wide margin, because the transaction costs are spread over three decades and the mortgage is largely repaid.
Estimates only. Your lender's figures may differ because of fees, escrow and rounding.
Getting the decision right
Be honest about how long you will stay
Buying carries large one-off costs: closing costs on the way in, agent commission on the way out. Those are fixed, so they are only recovered over time. If there is a real chance you move within three years, renting is usually cheaper regardless of what the monthly payments look like.
Include the costs nobody mentions at the viewing
Property tax, insurance, maintenance and HOA dues typically add 1.5 to 3 percent of the home's value every year. On a 400,000 dollar house that is 6,000 to 12,000 dollars annually, none of which builds a single dollar of equity. This is the single most commonly underestimated number in the whole decision.
Count the deposit as an investment, not as free money
Eighty thousand dollars invested at 7 percent becomes about 157,000 dollars in ten years. That opportunity cost belongs on the renting side of the ledger. Comparisons that ignore it flatter buying, which is why so many of them conclude that owning always wins.
Expect the answer to change with the market
At 3 percent appreciation buying eventually wins; at 1 percent it may not win within your horizon. Nobody knows future appreciation, so test the pessimistic case rather than the optimistic one and see whether the decision still holds.
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Frequently asked questions
Is it cheaper to rent or buy?
It depends almost entirely on how long you stay and how fast rents rise. On the figures on this page, renting is about 10,000 dollars cheaper over ten years, but buying wins after roughly fourteen years and by a wide margin at thirty. There is no universal answer, which is why the calculator asks for your horizon.
What is the break-even point for buying a house?
It is the year the buyer's equity overtakes the renter's portfolio. That is typically somewhere between four and fifteen years depending on prices, rents, rates and appreciation. The rule of thumb that five years is enough comes from an era of lower prices relative to rents and lower transaction costs.
Why does renting win in the early years?
Because the buyer spends the deposit on the house while the renter keeps it invested, and because selling costs take a slice of the sale price. Add the ownership costs that build no equity and the early years clearly favour the renter. Ownership's advantage compounds later, as appreciation and principal repayment accumulate.
Should I count my mortgage payment as an investment?
Only the principal part. The interest portion is a cost, exactly like rent, and early in a mortgage it is the larger share of the payment. This calculator separates the two by tracking the loan balance rather than treating the whole payment as equity.
Does this calculator include tax deductions?
No. Mortgage interest and property tax deductions vary widely by country and by individual circumstances, and the standard deduction means many households receive no benefit at all. If you itemise and would benefit, the case for buying improves by whatever the deduction is worth to you.