Is it cheaper to rent or to own? That question hides a trap: the sticker prices look similar, but the cash flows are completely different. A renter writes one check each month and walks away at the end. A buyer writes a mortgage check, pays tax and insurance, fixes the water heater, pays 6% to sell, and only then learns whether the home appreciated. This rent-vs-buy calculator compares the total cost of both paths over the years you actually plan to stay, so you can see exactly when — and why — owning starts to win.
Adjust the sliders and the result card shows your projected cost of buying versus renting over your chosen holding period, plus the breakeven point where the two lines cross.
How to Use
- Enter the Home Price of the place you are considering buying.
- Set your Down Payment as a percentage. The classic 20% removes PMI and usually earns a better rate, but 5%–10% is common for first-time buyers.
- Type your Mortgage Rate (APR). If you have not locked a rate, test ±0.5% to stress your budget.
- Choose the Loan Term — 30 years is the default; 15 years builds equity faster but raises the payment.
- Fill in the buyer-side carrying costs: Property Tax, Home Insurance, and Maintenance (the 1%-of-value rule of thumb).
- Add the transaction costs: Buyer Closing Costs at purchase (typically 3%) and Selling Costs when you move (typically 6% for realtor commission).
- Set your expected Home Appreciation — the long-run US average is around 3% per year.
- On the renting side, enter your Current Monthly Rent and the expected Annual Rent Increase (usually 2%–5%).
- Set How Long You Plan to Stay — 5 years, 7 years, or whatever you expect. This single number is what flips the answer.
The result card compares the net total cost of buying (down payment, closing costs, every mortgage payment, tax, insurance, and maintenance, minus the cash you walk away with after selling) against the total rent you would pay over the same years.
Why Breakeven Depends on Time
Buying has two huge front-loaded costs that renting does not: closing costs at purchase and selling costs at exit. On a $400,000 home those two alone can total $36,000 — money that disappears before you build a penny of equity. In the early years, your mortgage payment also goes mostly to interest, not principal. That means selling after one or two years almost always loses money even in a rising market.
Renting, by contrast, costs you the rent check and nothing else — but rent goes up every year, while your mortgage principal-and-interest payment is fixed for the life of the loan. The longer you stay, the more years of rent increases the renter absorbs, and the more years of appreciation and principal paydown the buyer banks. That crossing point is your breakeven year.
The Math Behind the Comparison
The monthly principal-and-interest payment uses the standard amortization formula:
M = P × r(1 + r)ⁿ / ((1 + r)ⁿ − 1)
where P is the loan amount, r is the monthly rate, and n is the number of payments. After N years the remaining loan balance is projected with the same amortization schedule, the home value grows by your appreciation assumption, and the cash you get at sale is:
Net Sale Proceeds = HomeValue_N × (1 − SellingCost%) − RemainingBalance
The total cost of buying over N years is then:
BuyCost = DownPayment + BuyClosingCosts + N×12×MonthlyPI + N×(Tax + Insurance + Maintenance) − NetSaleProceeds
and the total cost of renting is simply the sum of rent checks, growing each year by your rent-increase assumption. A negative difference means buying comes out ahead; a positive difference means renting is cheaper during that window.
Examples
Example 1 — The default 7-year move. On a $400,000 home with 20% down at 6.5% for 30 years, 1.1% property tax, $1,500 insurance, 1% maintenance, 3% buy closing, 6% selling cost, 3% appreciation, against $2,000/month rent rising 3% per year: monthly P&I is about $2,023. After 7 years the loan balance is near $289,332, the home is worth about $491,950, and cash from selling is roughly $173,101. Total cost of buying lands around $158,099, while total rent over the same 7 years is about $183,899 — owning is cheaper by roughly $25,800.
Example 2 — The 5-year breakeven. Keep every number above but stay only 5 years. Total cost of buying drops to about $126,525 and total rent to about $127,419 — a gap of under $900. That is the breakeven zone: after about five years the front-loaded transaction costs have been eaten, and appreciation starts pulling buying ahead. Sell sooner than that and renting wins.
Example 3 — The $1,000,000 home. On a $1,000,000 place with 20% down at 6.5%, the monthly P&I alone is about $5,057. Over 7 years the calculator shows buying around $382,998 versus renting a comparable place for $367,798 — renting slightly cheaper here, because the high price means larger fixed transaction costs relative to equity built. Push the appreciation assumption up to 4% and the answer flips.
Example 4 — Zero-interest world. If rates are 0%, the payment splits the principal evenly: a $240,000 loan over 30 years is $667/month with no interest at all. Buying becomes dramatically cheaper, because the entire "cost" of the loan disappears.
FAQ
How long do I need to stay for buying to beat renting?
The classic rule of thumb is about 5 to 7 years. Selling earlier usually means the 6% realtor commission and 2%–5% closing costs have not been offset by appreciation and principal paydown. Run your own numbers by sliding "How Long You Plan to Stay" until the cost difference crosses zero.
Does this calculator count the down payment as "spent"?
No. The down payment is your money: it goes in at purchase and comes back (plus appreciation and principal buildup) when you sell, net of selling costs. The calculator subtracts your net sale proceeds from your buying costs, so the down payment itself is not double-counted.
What is the biggest hidden cost of buying?
Selling. A 6% realtor commission on a $400,000 home is $24,000 before transfer taxes, repairs, and staging. That is why short holding periods punish buyers so heavily — you pay that bill on the way out while your equity has had little time to grow.
Should I factor in the investment return on my down payment?
This version keeps the comparison simple by comparing out-of-pocket housing cost. In reality, the down payment and closing costs could have been invested in stocks or bonds. If you expect investment returns well above your mortgage rate, renting and investing the difference can win; if not, owning behaves like a forced savings plan with leverage.
How do property taxes and maintenance change the answer?
They are pure annual costs of owning that renters avoid. Property tax of 1.1% on a $400,000 home is $4,400 per year, and the 1%-of-value maintenance rule adds another $4,000 — together that is $8,400 a year the renter does not pay. In high-tax states like New Jersey or Texas, these line items alone can push the breakeven out by a year or two.
Is it always better to buy if I plan to stay 10 years or more?
Usually yes, but not automatically. If your market appreciation assumption is near zero, your property taxes are very high, or your rent is unusually cheap for the area, renting and investing the saved difference can still win. Use the sliders, not the rule of thumb, and stress-test both appreciation and rent growth.
What if rent rises faster than home values?
That narrows the gap fast. Every extra point of annual rent increase adds up over N years, while your mortgage P&I stays fixed. In tight rental markets with 5% annual rent growth, the breakeven year can move two years earlier.
Disclaimer
This rent-vs-buy calculator is provided for informational purposes only and does not constitute financial, real-estate, tax, or investment advice. Estimates rely on the assumptions you enter, including appreciation, rent growth, tax, insurance, and maintenance; actual results depend on your local market, loan terms, tax situation, and how long you actually stay. Home values can fall as well as rise. Always consult a licensed mortgage lender and a qualified tax or real-estate professional before deciding whether to rent or buy.