Rent vs Buy Calculator

The calculator runs two parallel multi-year cash-flow models over the horizon you choose. On the buy side it totals all out-of-pocket cash (down payment, closing costs, mortgage P&I, property tax, insurance, maintenance, HOA) then subtracts the net sale proceeds (appreciated home value minus selling costs and remaining loan balance) to get a net cost. On the rent side it totals all rent payments and renter's insurance then subtracts the investment gains the renter earns by putting the buyer's upfront capital (down payment + closing costs) into the market at your chosen investment-return rate. Whichever net cost is lower wins.

The break-even year is the first year at which the cumulative net cost of buying drops at or below the cumulative net cost of renting. Before that year, renting is cheaper; after it, buying is cheaper. It captures the combined effect of building equity (which reduces your net cost) versus accumulating rent without equity. A common rule of thumb is that buying starts to win around years 5–7, but the actual number depends heavily on your local price-to-rent ratio, home appreciation rate, and the investment return the renter earns.

The price-to-rent ratio is home price divided by annual rent (home price ÷ 12 × monthly rent). It is a quick market indicator: below 15 generally favors buying, 16–20 is borderline, and 21 or above generally favors renting. For example, a $300,000 home with $1,800/month rent gives a ratio of 13.9 (buy-favored). The ratio is a rough heuristic — the full multi-year net-cost model above is the more authoritative comparison because it accounts for appreciation, opportunity cost, and holding period.

Yes. When you buy, you tie up a large sum (down payment + closing costs) in an illiquid asset. The rent side of the model credits the renter with the investment return they could earn on that same capital — entered as the 'Investment Return' field. The default is 5% per year (roughly in line with a balanced portfolio). Increasing this rate makes renting look more attractive; decreasing it favors buying.

Tax effects vary significantly by country, filing status, income level and whether you itemize. In the U.S., the standard deduction ($29,200 for married filing jointly in 2024) means most homeowners no longer itemize, so the mortgage-interest deduction has limited practical effect. The calculator defaults to a pre-tax, pre-deduction comparison so it works correctly for all users. You can approximate the after-tax benefit by reducing your effective mortgage rate input to reflect the deduction you actually expect to claim.

In the U.S., conventional loans typically require 5%–20% down, with 20% avoiding private mortgage insurance (PMI). FHA loans allow as little as 3.5% down. The calculator defaults to 20% but lets you enter any amount from 0% to 100%. Note that this calculator does not model PMI for down payments below 20% — if your down payment is under 20%, add an estimate of your annual PMI cost to the Maintenance field as a workaround.

Buying closing costs (typically 2%–5% of the purchase price, per CFPB and NAR) are a sunk cost paid upfront. They increase your buy-path outflows and also form part of the capital the rent model credits as investable — so they hurt the buy case in two ways in the short term. Over a long enough horizon the equity build-up and appreciation offset them. This is one reason the break-even horizon is generally 4–7 years rather than immediate.

The default is 6%, which reflects the traditional U.S. real-estate agent commission (historically 5%–6%) plus transfer taxes and other transaction costs. Since the NAR commission settlement (effective August 2024), buyer-agent fees may be unbundled, potentially reducing total selling costs. You can lower this input to reflect lower-commission markets or direct sales. On a $300,000 home, 6% is $18,000 — a significant drag on the buy side for short holding periods.

U.S. home prices have historically appreciated at roughly 3%–4% per year on a national average, but local markets vary enormously — high-demand coastal cities have outpaced this while some markets have seen flat or negative appreciation for extended periods. The calculator default is 3% (conservative). Entering 0% models no appreciation; negative values model a declining market. Because the result is highly sensitive to this assumption, try several values to stress-test your decision.

Yes, with adjustments. The mortgage payment formula (fully-amortizing, monthly compounding) is used worldwide. However, the default percentages for buying closing costs (3%), selling costs (6%) and property tax (1.2%) reflect U.S. norms. In the UK, stamp duty and estate-agent fees differ; in India, registration charges and rental norms differ. Adjust the percentage inputs to match your local market before interpreting the results. The calculator logic is currency-agnostic.

A common rule of thumb is to budget 1%–2% of the home's value per year for maintenance and repairs (the '1% rule'). The default is 1%. For newer homes or condos where the HOA covers exterior maintenance, this may be lower. For older homes or in expensive repair markets, 1.5%–2% is more realistic. Maintenance is one of the most underestimated costs of ownership — it includes routine items (HVAC servicing, roof, plumbing, appliances) as well as periodic larger outlays.

The rent-path model compounds rent at your chosen annual rate for each year of the horizon. At 3% annual increases, a $1,800/month rent becomes roughly $2,154/month after 7 years. Rising rent makes renting more expensive over time and tends to favor buying on a long horizon. If you live in a rent-controlled area with low annual increases, set this input accordingly — it could materially change the break-even year.

Yes — and it is one of the most significant tax benefits of homeownership. Under U.S. tax law (IRC § 121), a single filer can exclude up to $250,000 of capital gains from the sale of a primary residence from taxable income; married couples filing jointly can exclude up to $500,000. The home must have been owned and used as your primary residence for at least 2 of the 5 years before the sale. For many homeowners this means the entire gain on a long-held home is tax-free. The calculator comparison is pre-tax by default, so if your projected gain at sale would otherwise be taxable, the actual after-tax advantage of buying is somewhat better than the calculator shows. Gains exceeding the exclusion, and sales that do not meet the 2-of-5-year rule, remain subject to capital gains tax.

Utilities are worth keeping in mind, though they are not in the calculator because they depend heavily on the specific property. Homeowners pay for all utilities directly; renters sometimes have utilities bundled into rent (particularly water and trash) or pay them separately. More importantly, a larger owned home typically carries higher heating, cooling and electricity costs than an equivalent rental unit. If the home you plan to buy is meaningfully larger than the unit you would rent, adding an estimated monthly utility premium to the calculator's Maintenance field can make the comparison more accurate.

The financial model is only part of the picture. Renting may be the smarter choice when: your job or life plans may require a move within the next 3–5 years (short holding periods rarely allow buying to break even after transaction costs); you are building an emergency fund or carrying high-interest debt that should be paid down first; you are new to a city and want time to identify the right neighbourhood before committing; or you value the flexibility to relocate without the time and expense of selling. A home is also an illiquid asset — if circumstances force a sale in a down market or before your break-even year, you may crystallise a real loss that the long-run projection does not capture.