Rent vs Buy Calculator: Compare the Real Cost of Renting and Buying and Find Your Break-Even Year
Should you buy or rent? This buy or rent calculator compares the full cost of buying a home with the cost of renting for a chosen number of years. It includes mortgage interest, property tax, insurance, maintenance, closing and selling costs, home appreciation, rent growth, and the opportunity cost of investing your down payment instead. The result shows the year in which buying breaks even — or tells you if it does not within your horizon.
This is a modeled comparison, not advice. Every growth, return, and cost percentage is an assumption you control. The tax effect of mortgage interest and property tax is off by default because it depends on itemizing and on SALT and mortgage-interest limits. Local property tax, insurance, and rent vary widely; no national default is presented as fact.
Rent vs Buy Calculator Inputs
Rent vs Buy: Your Break-Even Year
| Year | Home Value | Loan Balance | Equity After Selling Costs | Cumulative Owner Cost | Renter Investment Value | Cumulative Rent Cost | Net-Worth Diff (Buy − Rent) |
|---|
Sensitivity: Break-Even Year by Appreciation & Investment Return
| Appreciation \ Return |
|---|
Scenarios, not forecasts. Each cell re-runs the engine with the stated assumptions.
Costs People Forget (Checklist)
- Maintenance & repairs: Budget 0.5%–2% of home value per year. Source: common convention; not a rule.
- HOA / condo fees: Can rise over time; special assessments possible.
- Homeowner's insurance: Often 2–3× renter's insurance; varies by peril zone.
- Selling costs: Typically 5%–7% (agent commissions, transfer tax, prep).
- Buying closing costs: Typically 2%–5% (lender fees, title, recording).
- Property tax reassessment: May jump after purchase in some states.
These are neutral reminders. Enter your local numbers in the calculator above.
Renting versus buying a home: how the buying vs renting calculator comparison is calculated
Mortgage payment
Monthly principal and interest: P = L × r / (1 − (1 + r)−n), where L is the loan amount, r is the monthly rate (annual rate ÷ 12), and n is the number of monthly payments. Payment and each month's interest are rounded half-up to the cent.
Owner's yearly cost (cash outlay)
Mortgage interest + property tax + homeowner's insurance + maintenance + HOA dues. Principal repayment is not a cost; it builds equity.
Home value and equity
Home value at year t: Price × (1 + g)t, where g is the annual appreciation rate. Net equity after selling costs: Value × (1 − sellingCost%) − Remaining Loan Balance.
Renter's investment pool
Starts with down payment + buying closing costs. Each month, the difference (owner's monthly cash cost − renter's monthly cash cost) is added when positive. The pool compounds monthly at the stated annual return ÷ 12. Rent increases once per year at the stated rate; each year's rent is rounded to the cent.
Break-even year
The first year in which the buyer's net wealth (equity after selling costs) is at least the renter's investment value. If never within the horizon, the result states "no break-even within the horizon."
Optional tax effect (OFF by default)
If enabled, the model estimates the federal tax savings from itemizing qualified mortgage interest and property tax, subject to the $750,000 acquisition-debt limit and the SALT cap ($10,000 single / $20,200 MFS for 2026 per secondary sources; confirm with the IRS). The marginal rate you enter applies only to the deductible amount. This is a rough estimate; consult a tax professional.
Rounding policy
Monthly payment and monthly interest: rounded half-up to the cent. Yearly figures are sums of monthly rounded figures. Rent schedule: each year's rent rounded to the cent. Summaries show whole dollars; the schedule shows cents.
Worked Example (Hypothetical Inputs)
Inputs: Home price $400,000; 20% down ($80,000); loan $320,000 at 6.50% for 30 years; property tax 1.10%; insurance $1,800/yr; maintenance 1.00%; HOA $0; closing costs 3% buy / 6% sell; appreciation 3.00%; rent $2,200/mo with 3.00% annual increase; renter's insurance $200/yr; investment return 5.00%; horizon 7 years; tax switch OFF.
- Monthly P&I: $2,022.62
- Year-1 interest: $20,694.68; year-1 principal: $3,576.76
- Loan balance after 7 years (84 payments): $289,331.75
- Home value at year 7: $491,949.55; selling costs (6%): $29,516.97
- Net equity after selling costs: $173,100.83
- Total rent paid over 7 years: $202,289.00
- Renter's investment value (down payment + closing costs invested at 5% for 84 months): $113,442.88
- Net-worth difference (buy − rent) at year 7: buyer ahead by approximately $59,658
- Break-even year: Year 4 (first year buyer's net wealth ≥ renter's)
These values were computed with exact decimal arithmetic using the stated inputs and rounding policy. They test arithmetic, not law. Any tax, legal, or program rule must be verified against the primary source for the selected year.
FAQ
Is it better to rent or buy a house?
There is no universal answer. The comparison depends on your horizon (how long you stay), mortgage rate, home appreciation, rent growth, property tax, insurance, maintenance, selling costs, and what your down payment could earn invested elsewhere. This calculator lets you enter your assumptions and shows the break-even year — or tells you if buying does not break even within your horizon. See the method section for the formulas and the worked example for a hypothetical illustration.
Should I buy or rent a house?
The decision depends on the same factors above. This tool does not recommend; it models the financial comparison so you can see the trade-offs. Adjust the appreciation rate, investment return, and rent growth to test scenarios. The sensitivity table shows how the break-even year changes.
How long do you need to stay in a house for buying to make sense?
The break-even year is the first year your net wealth from buying (equity after selling costs) equals or exceeds the renter's invested wealth (down payment + closing costs + monthly savings difference, compounded at your assumed return). In the worked example with 3% appreciation and 5% investment return, the break-even year is year 4. With 0% appreciation and 5% return, there may be no break-even within 30 years.
What is the opportunity cost of a down payment?
The down payment and buying closing costs could be invested instead. This calculator grows that amount at your stated annual return (compounded monthly) and adds any monthly cash-flow savings from renting. The result is the renter's investment value, which is compared against the buyer's net equity. The return is an assumption you set; it is not a forecast.
Is renting throwing money away?
No. Renting buys housing services without the transaction costs, maintenance risk, property tax, and illiquidity of owning. The renter's down payment and any monthly cash-flow advantage can be invested. Whether renting or buying leaves you better off depends on the numbers — not a slogan.
How much should I save for a down payment?
This calculator takes your down payment as an input. For guidance on savings targets, see the CFPB's Your Home Loan Toolkit (consumerfinance.gov) and speak with a HUD-approved housing counselor.
Glossary
- Opportunity cost
- The value of the next-best alternative forgone. Here: what the down payment and monthly savings difference would grow to if invested at your stated return instead of being used to buy.
- Home equity
- Home value minus remaining loan balance. After selling costs: value × (1 − selling cost %) − loan balance.
- Appreciation
- Annual percentage increase in home value. An assumption, not a forecast. Can be negative.
- Maintenance cost
- Annual budget for repairs and upkeep. Common convention: 1% of home value per year; not a rule.
- Closing costs
- Fees paid at purchase (lender fees, title, recording, etc.) and at sale (agent commissions, transfer tax, prep). Entered as a percent of home price.
- Break-even year
- The first year in which the buyer's net wealth (equity after selling costs) is at least the renter's investment value.
- SALT cap
- State and local tax deduction limit. For 2026, secondary sources report $10,000 single / $20,200 MFS with a phase-down above $505,000 AGI; confirm with the IRS.
Official References & Last Checked
Primary sources for rules and formulas used in this calculator:
- CFPB — Your Home Loan Toolkit, Loan Estimate Explainer, Closing Disclosure Explainer (consumerfinance.gov) — mortgage process, closing costs, payoff statements.
- eCFR — 12 CFR Part 1026 (Regulation Z), §§ 1026.37 (Loan Estimate), 1026.38 (Closing Disclosure), 1026.36(c)(3) (payoff statements), 1026.43(g) (prepayment penalties on qualified mortgages).
- IRS Publication 936 — Home Mortgage Interest Deduction (limits, qualified debt, points).
- IRS Publication 523 — Selling Your Home (Section 121 exclusion, basis, gain).
- IRS Revenue Procedure 2025-32 — 2026 inflation adjustments (standard deduction, brackets, SALT cap).
- Freddie Mac Primary Mortgage Market Survey (PMMS) — dated rate context only (freddiemac.com).
Last checked: 2026-10-18. Note: all regulated numbers are editable inputs with defaults. Treat every percentage and threshold as an assumption you must confirm. See Method & Sources for details.
Limitations, Exclusions & Assumptions
- No tax-return preparation, mortgage qualification, or pre-approval modeling.
- Fixed-rate, fully amortizing loans only. No ARM, interest-only, or balloon modeling.
- No investment-property, rental-property, or house-hacking scenarios.
- No down-payment assistance program modeling.
- PMI is not modeled automatically; enter as a monthly cost in HOA/insurance if needed.
- Home-sale capital gain tax (Section 121) is not modeled; see IRS Publication 523.
- No market forecasts. Every growth/return percentage is a user assumption.
- No recommendation to buy or rent. The model compares wealth, not utility.
- State and local variation: property tax, insurance, HOA, transfer tax, rent control, and rent levels vary widely and are user inputs.
- Optional tax effect uses secondary-source 2026 figures; confirm with the IRS. Keep OFF unless you verify the rules for your tax year.
Adjust the assumptions above to match your situation. The break-even year and year-by-year table update instantly. For a detailed mortgage payment breakdown, see the Mortgage Calculator.
