Rent vs Buy Calculator — Free Online Home Comparison Tool

How to Use the Rent vs Buy Calculator

This calculator performs a comprehensive financial comparison between renting and buying by tracking all costs and benefits over your specified time horizon. It accounts for the primary financial factors that differentiate the two options: equity buildup from home appreciation versus the lower upfront costs of renting. Follow these steps for an accurate analysis.

1. Enter the home purchase details. Start with the price of a home you would realistically buy. Input your planned down payment (20% is standard to avoid PMI), the current mortgage rate (check current averages at Freddie Mac), the loan term (30 years is most common), the local property tax rate (found on your county assessor website), and an estimated maintenance rate (1% of home value per year is standard).
2. Set the home appreciation rate. This represents how much the home value is expected to increase annually. The national average is approximately 3-4%, but local markets vary significantly. Use historical data for your target area as a guide. A conservative estimate of 3% is reasonable for most markets. Higher appreciation rates favor buying; lower rates favor renting.
3. Enter your renting details. Input the monthly rent you currently pay or would pay for a comparable rental property. Set the expected annual rent increase based on your local market (3% is a national average, but check your area trends). Higher rent increases shift the comparison toward buying over longer periods.
4. Choose the comparison period. This is how long you plan to live in the area. Short periods (1-3 years) almost always favor renting due to the high upfront costs of buying. Medium periods (5-7 years) are typically the break-even zone. Long periods (10+ years) generally favor buying. Enter the number of years that reflects your realistic plans.
5. Analyze the results. The calculator shows: which option saves more money over your chosen period, the break-even year (when buying becomes cheaper than renting), total costs for each option, accumulated home equity, and a chart comparing cumulative costs over time. The chart makes it visually clear when and where the lines cross.

Run multiple scenarios to stress-test the decision. Try pessimistic assumptions (lower appreciation, higher rates) and optimistic ones (higher appreciation, lower rates) to see how sensitive the outcome is to market conditions.

The Rent vs Buy Comparison Formula

The calculator tracks two parallel financial timelines, one for renting and one for buying, then compares the net cost of each at every year. The buy-side accounts for both costs and asset growth (equity), while the rent side is pure expense with no equity buildup.

Each side tracks these components year by year:

• Buy Side: Down payment + cumulative mortgage payments + property taxes + maintenance costs − (home value − remaining loan balance)
• Rent Side: Cumulative monthly rent (with annual increases applied each year)
• Home Value = Purchase Price × (1 + Appreciation Rate)^Years
• Equity = Current Home Value − Remaining Mortgage Balance
• Break-Even Year = First year where Rent Cumulative > Buy Net Cost

Step-by-Step Comparison Example

Compare buying a $350,000 home (20% down, 6.5% rate, 30-year term, 1.1% property tax, 1% maintenance, 3.5% appreciation) versus renting at $1,800/month with 3% annual increases over 10 years:

1. Down payment: $70,000 (20% of $350,000)
2. Monthly mortgage: $280,000 loan at 6.5% for 30 years = $1,770/month
3. Year 1 buy costs: Mortgage ($21,240) + property tax ($3,850) + maintenance ($3,500) = $28,590
4. Year 1 rent cost: $1,800 × 12 = $21,600
5. After 10 years buy total expenses: $70,000 down + ~$285,900 (mortgage + tax + maintenance) = ~$355,900
6. Home value at year 10: $350,000 × (1.035)¹⁰ = ~$493,500
7. Remaining mortgage balance: ~$241,000
8. Home equity: $493,500 − $241,000 = ~$252,500
9. Buy net cost: $355,900 − $252,500 = ~$103,400
10. Rent 10-year total: ~$247,600
11. Verdict: Buying saves approximately $144,200 over 10 years

This example illustrates how equity buildup from appreciation and mortgage paydown can significantly offset the higher costs of homeownership over a decade. The break-even point in this scenario occurs around year 4-5.

Practical Rent vs Buy Scenarios

These examples cover different life situations to help you see how the rent-versus-buy decision plays out under various conditions.

Short-Term Stay: 3 Years in a New City

Carlos relocates to Denver for a 3-year project. He considers renting at $2,100/month versus buying a $380,000 condo with 10% down. After running the numbers with 6.5% mortgage rate and 3% appreciation, buying costs approximately $46,000 net over 3 years (after accounting for closing costs of approximately $11,000 on both purchase and eventual sale), while renting costs $78,500. However, when he factors in the risk that property values could stagnate or decline and the certainty of selling costs (typically 6-8% of sale price), renting is the safer choice. The break-even point does not occur until year 6, well beyond his planned stay.

Long-Term Family Home: 15 Years

The Williams family is deciding between renting a four-bedroom house at $2,800/month or buying one for $480,000 with 20% down ($96,000). At 6.5% mortgage rate, 1.2% property tax, 3.5% appreciation, and 3% rent increases, the 15-year analysis shows: buying net cost = $182,000 versus renting total = $535,000. The home would be worth approximately $795,000 with $470,000 in equity. Buying saves the Williams family approximately $353,000 over 15 years. The break-even occurs in year 4. For families with long-term stability, buying is a clear financial winner.

High-Cost Market: San Francisco

Yuki compares renting a one-bedroom at $3,200/month versus buying a $850,000 condo in San Francisco with 20% down ($170,000). At 6.5% rate, 1.2% property tax, and 2% appreciation (more conservative for a mature, high-cost market), buying costs approximately $540,000 net over 10 years while renting totals $460,000 (at 4% annual increases). In this scenario, renting actually wins because the high purchase price generates enormous monthly costs (mortgage of $4,296, property tax of $850, maintenance of $708 = $5,854/month) that outpace even expensive rent. The break-even does not occur until year 14.

Affordable Market: Nashville Suburbs

Derek compares renting at $1,500/month versus buying a $290,000 home in the Nashville suburbs with 15% down ($43,500). At 6.5% rate, 0.7% property tax, 4% appreciation (reflecting Nashville growth), and 4% rent increases, the 10-year analysis shows: buying net cost = approximately $52,000 versus renting total = approximately $216,000. Strong appreciation and moderate home prices make buying dramatically favorable. The break-even occurs in just year 3. Derek decides to buy and uses our amortization calculator to understand his payment schedule.

Rent vs Buy Decision Guide and Tips

The rent-versus-buy decision is one of the most consequential financial choices you will make. Beyond the calculator numbers, consider these strategic factors and tips to make the right decision for your circumstances.

Factor In Your Life Stability

The financial math heavily favors buying only if you stay long enough to recoup upfront costs and build equity. If there is a meaningful chance you will relocate within 3-5 years due to career changes, relationship changes, or lifestyle preferences, the flexibility of renting has real financial value. Selling a home involves 6-10% in transaction costs (agent commissions, closing costs, repairs), which can easily erase years of equity buildup. Be honest about your life stability before committing to a purchase.

Do Not Overlook Opportunity Cost

Your down payment represents a large amount of capital. If you invest that money in a diversified portfolio returning 8-10% annually instead of tying it up in a home, the returns can be significant. On a $70,000 down payment, 10 years of stock market growth at 8% compounds to approximately $151,000, a gain of $81,000. Compare this to the equity buildup from homeownership in your market. In some scenarios, renting and investing the difference actually builds more wealth than buying.

Understand Your Local Price-to-Rent Ratio

The price-to-rent ratio (home price divided by annual rent for a comparable property) is a quick indicator of whether buying or renting is favored in your market. A ratio below 15 generally favors buying. A ratio of 16-20 is a gray zone where individual circumstances determine the best choice. A ratio above 21 generally favors renting. For example, a $350,000 home that would rent for $1,800/month has a ratio of 350,000 / 21,600 = 16.2, which is in the gray zone, requiring detailed analysis like this calculator provides.

Consider Non-Financial Benefits

Some advantages of each option cannot be captured in a calculator. Buying offers stability, customization freedom, a sense of ownership, potential school district choice for families, and a forced savings mechanism through equity buildup. Renting offers flexibility, no maintenance responsibility, easier downsizing, and the ability to live in areas where buying is unaffordable. Weigh these lifestyle factors alongside the financial analysis.

Common Mistakes to Avoid

• Comparing only monthly payment to monthly rent. A $1,700 mortgage payment is not directly comparable to $1,700 rent. The mortgage payment includes principal (equity building) and interest (cost), while rent is entirely cost. Always compare total costs net of equity, which is exactly what this calculator does.
• Assuming home prices always go up. The 2008 financial crisis demonstrated that home values can decline 20-40% in severe downturns. While long-term trends are positive, there is no guarantee your specific home will appreciate at the average rate. Use conservative appreciation estimates (2-3%) rather than optimistic ones to avoid overcommitting financially.
• Ignoring maintenance and repair costs. New homeowners are often shocked by maintenance expenses. The 1% rule (budget 1% of home value annually for maintenance) is a minimum; older homes may require 1.5-2%. On a $350,000 home, that is $3,500-$7,000 per year. Major items like roof replacement ($8,000-15,000), HVAC ($4,000-8,000), and foundation repairs ($5,000-15,000) can exceed annual estimates in a single event. Our house affordability calculator helps you budget for these total costs.
• Overextending on purchase price. Being house-poor (spending too much on housing, leaving little for other financial goals) is worse than renting comfortably. A mortgage payment you can barely afford leaves no room for retirement savings, emergency funds, or enjoying life. The 28/36 rule suggests housing costs should not exceed 28% of gross income, and total debt payments should stay below 36%.
• Making an emotional decision. Home buying is emotional, which can lead to overpaying or buying before you are financially ready. Let the numbers guide your decision. If the calculator shows renting is better for your situation, embrace it. There is no shame in renting, and the financial flexibility it provides can position you for a stronger purchase in the future.