Rent vs Buy Calculator
Renting or buying is cheaper depending on how long you stay. Compare the wealth each path leaves you when you move. Take a $400,000 home with 10% down at an example 6.5% rate against $2,400 rent: after 7 years, renting and investing the difference is $7,854 ahead, and buying pulls ahead in year 9. The rent vs buy calculator below runs your own numbers.
Example figures. Replace them with your own.
10% of the price, so PMI applies
of the home’s value
of the home’s value
of the loan, only under 20% down
CFPB: typically 2% to 5%
of the sale price
after fees, not guaranteed
Show steps
- Loan = home price − down payment = $400,000 − $40,000 = $360,000 (10% down).
- Monthly principal and interest: r = 6.5% ÷ 12, n = 30 × 12 = 360 payments, M = P × r(1 + r)ⁿ ÷ ((1 + r)ⁿ − 1) = $2,275.44.
- With less than 20% down, PMI of 0.5% of the loan a year adds $150.00 a month. It stops after payment 109 (about year 10), when the scheduled balance reaches 78% of the price or the loan reaches its midpoint.
- Cash needed to buy = down payment + closing costs = $40,000 + 3% × $400,000 = $52,000. The renter keeps this cash and invests it at 5% a year.
- Month 1 cost to own = P&I $2,275.44 + PMI $150.00 + tax $366.67 + insurance $150.00 + maintenance $333.33 = $3,275.44. Month 1 cost to rent = $2,400.00 + $20.00 insurance = $2,420.00.
- Each month, whoever pays less invests the difference (the renter invests $855.44 in month 1). Rent rises 3% a year; tax and maintenance follow the home value, and insurance and HOA rise 3% a year.
- After 7 years the home is worth $400,000 × (1 + 3%)^7 = $491,950. Selling costs 6% ($29,517) and the loan balance is $325,499, so the owner walks away with $136,934.
- The renter’s investments grow to $144,788. Difference: $136,934 − $144,788 = −$7,854, so renting is ahead.
- Net cost = what all the money put into housing would have grown to ($407,966) − what you end with. Buying: $271,033. Renting: $263,178. The lower net cost wins, by the same $7,854 ✓
How to use the rent vs buy calculator
- Under Buying, enter the home price, your down payment, a mortgage rate you could get, and the yearly costs: property tax, insurance, HOA, maintenance and PMI.
- Enter closing costs to buy and the costs to sell later, both as a percent of the price, and how fast you expect the home’s value to grow.
- Under Renting, enter your rent, how much it rises each year, and renter’s insurance.
- Under Your plans, enter how many years you expect to stay and the yearly return you could earn on money you invest.
- Read the verdict and the break-even year, then switch between the wealth chart, the net cost chart and the year-by-year table.
Every market figure on the form is an example, not a forecast. Rates, rents and home prices vary widely by place and change over time, so replace them with quotes and listings from your area.
How the rent vs buy comparison works
A fair comparison gives both households the same money and asks who ends up with more. The calculator follows one buyer and one renter month by month.
- Cost to own each month = mortgage principal and interest + PMI (until it ends) + property tax + home insurance + HOA + maintenance.
- Cost to rent each month = rent + renter’s insurance.
- Cash to buy = down payment + closing costs. The renter does not spend it, so the renter invests it on day one.
- Each month, whoever pays less invests the difference at your investment return. This is the opportunity cost: money tied up in a house cannot also grow in an investment account.
- Buyer’s wealth at the end of a year = home value − selling costs − loan balance + any investments.
- Renter’s wealth = the renter’s investments.
- Net cost of a path = what all the money put into housing would have grown to − the wealth you end with. The path with the lower net cost leaves you richer by the same amount.
- The break-even year is the first year in which the buyer’s wealth reaches the renter’s.
The mortgage payment uses the standard formula M = P × r(1 + r)ⁿ ÷ ((1 + r)ⁿ − 1), where P is the loan, r the monthly rate and n the number of payments. PMI ends when the scheduled balance reaches 78% of the original price or at the loan’s midpoint, as the Homeowners Protection Act requires.
Worked example: renting comes out ahead over 7 years
The calculator’s example uses a $400,000 home, $40,000 (10%) down, an example 6.5% rate on a 30-year loan, 1.1% property tax, $1,800 a year of insurance, 1% maintenance, 0.5% PMI, 3% closing costs, 6% selling costs and 3% yearly growth in home value. The rent is $2,400 plus $20 of insurance, rising 3% a year, and invested money earns 5%.
- Loan: $400,000 − $40,000 = $360,000. Principal and interest: $2,275.44 a month.
- Month 1 cost to own: $2,275.44 + $150.00 PMI + $366.67 tax + $150.00 insurance + $333.33 maintenance = $3,275.44.
- Month 1 cost to rent: $2,400.00 + $20.00 = $2,420.00, so the renter invests the $855.44 difference.
- Cash to buy: $40,000 + 3% of $400,000 = $52,000, which the renter invests instead.
- After 7 years the home is worth $400,000 × 1.03⁷ = $491,950. Selling costs take $29,517 and the loan balance is $325,499, so the owner walks away with $136,934.
- The renter’s investments have grown to $144,788. Renting is ahead by $144,788 − $136,934 = $7,854.
- By the end of year 9 the buyer has $178,189 and the renter $171,360, so year 9 is the break-even year.
With the same numbers and a $80,000 (20%) down payment, PMI disappears, the payment falls to $2,022.62, and buying breaks even in year 6.
Which assumptions change the answer most
Each row changes one input from the example and keeps everything else the same.
| Change from the example | Break-even year | Ahead after 7 years |
|---|---|---|
| None (example) | 9 | Rent by $7,854 |
| Rent $2,200 instead of $2,400 | 13 | Rent by $29,605 |
| Rent $2,600 | 6 | Buy by $13,896 |
| Home value growth 2% instead of 3% | 14 | Rent by $36,255 |
| Home value growth 4% | 5 | Buy by $22,308 |
| Mortgage rate 5.5% instead of 6.5% | 5 | Buy by $21,030 |
| Mortgage rate 7.5% | 14 | Rent by $37,113 |
| Investment return 7% instead of 5% | 13 | Rent by $23,764 |
| Maintenance 2% instead of 1% | 18 | Rent by $44,105 |
| 20% down instead of 10% | 6 | Buy by $12,280 |
How long you stay matters just as much. In the example, renting is ahead by $27,749 after 3 years and $19,233 after 5, while buying is ahead by $17,248 after 10 years and $88,374 after 15. Buying and selling costs are paid once, so the longer you own, the more years share them.
What the calculator leaves out
- Taxes. The mortgage interest deduction helps only if you itemize deductions instead of taking the standard deduction (IRS Publication 936). Taxes on investment gains and on a home sale are not modeled either, so treat close results as a tie.
- Refundable deposits and moving costs. A security deposit usually comes back; moving costs apply to both paths.
- Unequal habits. The comparison assumes the renter really invests the difference. If that money would be spent, the mortgage’s built-in saving makes buying look better.
- Life. Ownership brings control and stable payments on a fixed-rate loan; renting brings flexibility and no repair bills. The Consumer Financial Protection Bureau notes that leaving a rental is easier than selling a house.
Common rent vs buy mistakes
- Comparing rent with the mortgage payment alone. Tax, insurance, maintenance, HOA and PMI often add a third or more to the payment.
- Ignoring closing and selling costs. The CFPB says closing costs typically run 2% to 5% of the price, and selling has its own costs. Together they can erase years of equity on a short stay.
- Assuming fast price growth. Home values can stay flat or fall. Try a lower growth rate to see how much the answer depends on it.
- Forgetting the down payment’s other use. Money in a house is not earning investment returns, which is why the renter invests it here.
- Using today’s rent for 20 years. Rent rises too, which is why long stays favor buying.
Sources
All checked November 2026.
- CFPB: Figure out how much you want to spend (closing costs typically 2% to 5%)
- CFPB: Buying or renting a home? (worksheet, PDF)
- CFPB: What is private mortgage insurance?
- CFPB: When can I remove PMI from my loan?
- IRS Publication 936: Home Mortgage Interest Deduction (for 2025 returns)
- Investor.gov (SEC): Compound interest
Results are estimates based on your assumptions, not financial, tax or lending advice.
Rent vs buy practice quiz: 10 questions
Test yourself with 10 multiple-choice questions. Choose an answer and press Submit to see if you are right and why. Your score appears at the end.
The down payment is 10% × $300,000 = $30,000, so the loan is $300,000 − $30,000 = $270,000.
Closing costs are 0.03 × $400,000 = $12,000. Add the $40,000 down payment: $52,000. Adding $3,000 treats 3% as 3% of the down payment.
Yearly tax = 0.012 × $350,000 = $4,200, and $4,200 ÷ 12 = $350 a month.
Rent rises twice before year 3: $2,000 × 1.03 × 1.03 = $2,121.80. Adding 3% of $2,000 each time gives $2,120, which ignores compounding.
The value after 2 years is $500,000 × 1.04² = $540,800, and 6% of that is $32,448. Using the original price gives $30,000.
Both households spend the same budget. The renter pays $600 less, so the renter invests the $600 at the chosen return.
$50,000 × 1.05² = $55,125. Simple interest of $2,500 a year would give $55,000, which misses the interest on interest.
$460,000 − $27,600 − $330,000 = $102,400. Forgetting the selling costs gives $130,000.
The servicer must end PMI automatically at 78% if you are current on payments. At 80% you can ask to cancel it in writing.
The break-even year is the first year in which the buyer’s wealth reaches the renter’s. In year 8 the buyer is still behind; in year 9 the buyer is ahead.
Quiz complete
Frequently asked questions
Is it cheaper to rent or buy a house?
It depends on how long you stay, the rent compared with the price, the mortgage rate, and how fast home values and investments grow. In the example, renting is ahead for a 7-year stay and buying wins from year 9 onward. Enter your own figures to see your break-even year.
How long do you need to stay for buying to pay off?
Long enough for home value growth and loan paydown to cover the one-time costs of buying and selling. That is 9 years in the example, 6 years with 20% down, and 5 years if rent were $2,800. There is no single rule, so check the break-even year for your numbers.
What is the opportunity cost of a down payment?
It is the return the money could have earned if you had invested it instead. A $52,000 down payment and closing cost invested at 5% a year would grow to about $73,169 in 7 years before any taxes. The calculator gives that growth to the renter.
Does paying rent build equity?
No. As the CFPB puts it, you do not build equity when you rent. A renter can still build wealth by investing the money a buyer would have put into a down payment and higher monthly costs, which is what the calculator assumes.
Should I include the mortgage interest deduction?
Only if you itemize deductions on your tax return. Many homeowners take the standard deduction instead and get no extra benefit from mortgage interest. Because this depends on your whole tax situation, the calculator leaves it out; IRS Publication 936 explains the rules.
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