How the rent vs buy calculator works
The calculator follows two people with the same savings and the same monthly budget, month by month. The buyer pays the down payment and closing costs, then the mortgage, property tax, insurance, maintenance, HOA and PMI. The renter keeps the down payment and closing costs invested and pays rent. Each month, whoever has the lower housing cost invests the difference at the return you enter.
At the end of every year it asks: if the buyer sold the home now, paid off the loan and the selling costs, who would have more? That is the net worth comparison in the table. The year from which buying stays ahead is the break-even year.
Unrecoverable costs: the money you never get back
Rent is often called throwing money away, but owning has its own costs that never come back. Mortgage interest, property tax, insurance, maintenance, HOA fees and the costs of buying and selling a home add up. Early in a mortgage most of each payment is interest, and selling costs alone can eat several years of appreciation. Principal payments are different: they build equity, which you get back when you sell. The stats under the result show both sides' unrecoverable costs over the years you compare.
Opportunity cost and appreciation
A down payment is money that could have been invested. If it would have earned more in the market than the home gains in value, renting can win even when the rent is close to the mortgage payment. That is why the investment return and the home appreciation rate matter so much. Here is the break-even year for a $400,000 home with 20 percent down at 6.5 percent and $2,300 a month in rent rising 3 percent a year, with the other defaults:
| Appreciation | 4% return | 6% return | 8% return |
|---|---|---|---|
| 2% a year | Year 10 | Year 16 | Not within 30 years |
| 3% a year | Year 6 | Year 9 | Not within 30 years |
| 4% a year | Year 4 | Year 6 | Year 9 |
Nobody knows future returns or home prices. Try a cautious and an optimistic case and see whether the answer changes.
What the calculator leaves out
- Taxes: no mortgage interest or property tax deduction, no tax on investment gains, and no tax-free home sale gain. Depending on your situation these can favor either side.
- Refinancing, rate changes and moving costs are not included. The mortgage is a fixed-rate loan.
- Life: owning gives stability and freedom to change the home; renting gives flexibility and no surprise repair bills. Those are worth something too.
How to use the rent vs buy calculator
- 1Enter the home price, down payment, mortgage rate and term, and how fast you expect home prices to rise.
- 2Enter the rent for a similar home, the yearly rent increase and the return your savings would earn. Adjust the costs of owning, buying and selling for your area.
- 3Pick how many years you expect to stay. Read which option leaves you with more money, the break-even year and the year table, then copy the result or share a link.
Frequently asked questions
Is it better to rent or buy a home?
It depends mostly on how long you stay, how fast home prices and rents rise, and what your money would earn if you did not put it into a house. Buying has large one-time costs when you buy and sell, so it usually needs several years to pay off. If you might move within a few years, renting is often cheaper.
What does the break-even year mean?
It is the first year from which you would have more money as an owner than as a renter if you sold the home at the end of that year, after paying off the loan and the selling costs. Before that year, renting and investing the difference leaves you better off.
Why does the renter invest the down payment?
To compare fairly. The buyer puts the down payment and closing costs into the home, so the renter keeps that cash and invests it. Each month, whoever has the lower housing cost invests the difference. That way both sides spend exactly the same money, and the only question is who ends up with more.
What are unrecoverable costs?
Money you pay and never get back. For a renter that is the rent. For an owner it is mortgage interest, property tax, insurance, maintenance, HOA fees, PMI and the costs of buying and selling. Principal payments are not on the list, because they build equity you get back when you sell.
Are taxes included?
No. The calculator leaves out the mortgage interest and property tax deductions, the tax-free gain on a home you live in, which has limits, and taxes on investment returns. These can tilt the result either way depending on your situation, so treat the result as an estimate, not financial advice.