Rent vs Buy Calculator: Which Is Cheaper?
"Should I keep renting or buy a home?" is rarely a simple question — the answer hides in interest rates, rent increases, property taxes and how long you'll stay. This free calculator lays out the full cost of both paths over your planned stay and tells you which one comes out ahead.
Rent vs Buy Calculator
Renting
Buying
Your Situation
How to Use This Calculator
Start with renting: your current monthly rent and how fast you expect it to rise (3% per year is typical). Then the home you'd buy: price, down payment percentage, mortgage rate, annual property tax rate, insurance and maintenance costs, and how fast you expect the home to appreciate.
Finally, enter how many years you plan to stay and what your down payment would earn if invested instead (a long-term market assumption of 5% to 7% is common). Click Calculate to see the full cost of each path and which one wins.
The Formula
Renting's total cost is the sum of rent payments growing at the increase rate, minus the investment growth of your would-be down payment. Buying's total cost is: down payment + all mortgage payments + property tax + insurance + maintenance, minus the home equity you'd have at the end (home value grown by appreciation, minus the remaining loan balance). Both paths are totaled over the same number of years.
Worked example: $1,600 rent rising 3% a year versus a $300,000 home with 20% down at 6.5% for 30 years, 1.2% property tax, $1,400 insurance, 1% maintenance, 3% appreciation, 6% investment return, 7-year stay. Renting costs about $147,100 over 7 years, minus $30,200 of investment growth on the down payment: net ≈ $116,900. Buying: $60,000 down + about $127,400 of mortgage payments + $56,000 of taxes, insurance and maintenance − roughly $151,950 of equity at year 7, for a net cost near $91,450. Buying wins by about $25,450 in this scenario — mostly because 7 years of mortgage payments built real equity.
Tips
Be conservative with appreciation. If the "buy" verdict depends on the home appreciating 6% a year, it's fragile — rerun at 2% and see if buying still wins.
Don't forget closing costs (2% to 5% of the price) and selling costs (typically 5% to 6% when you sell). This calculator omits them for simplicity, so treat a close result as a toss-up.
The rule of thumb: staying under 5 years usually favors renting; over 7 years usually favors buying. In between, the details decide — which is exactly what this calculator is for.
Frequently Asked Questions
Is it better to rent or buy a home?
It depends mainly on how long you'll stay. Buying has big upfront costs (down payment, closing costs) that take years to recover through equity building and appreciation — typically 5 to 7 years. If you'll move sooner, renting is usually cheaper and more flexible. If you'll stay a decade or more, buying often wins.
What hidden costs do homebuyers forget?
Property tax, homeowners insurance, maintenance (commonly 1% to 2% of the home's value per year), HOA fees, and closing costs of 2% to 5% of the price. The mortgage payment is only the start — all-in ownership costs are typically 30% to 50% higher than the mortgage alone. This calculator includes tax, insurance and maintenance so the comparison is honest.
What is the 5% rule of renting vs buying?
The 5% rule is a shortcut: estimate the unrecoverable annual cost of owning as about 5% of the home's value (roughly 1% property tax, 1% maintenance, 3% mortgage interest). If 5% of a comparable home's value is less than your annual rent, buying looks attractive; if it's more, renting is the better deal. This calculator does the same comparison in far more detail.
Does buying a home build wealth?
Buying builds equity in two ways: you pay down the loan every month, and the home may appreciate. But it's not automatic — buying at a peak, paying high interest, or selling within a few years can lose money after transaction costs. Renting while investing the difference can build wealth too. Run this calculator with conservative appreciation (2% to 3%) to see the realistic case.
How much do I need for a down payment?
Conventional loans often start at 3% down, FHA loans at 3.5%, and VA/USDA loans can go to 0%. Below 20% you'll typically pay private mortgage insurance (PMI), which adds about 0.5% to 1% of the loan per year. A larger down payment means lower payments and less total interest — but don't drain your emergency fund to reach 20%.
How should I factor rent increases into the comparison?
Assume rent rises roughly with local trends - 2-4% a year in most markets, more in hot cities. A $1,800 rent growing 3% yearly becomes $2,700 in 14 years, while a fixed-rate mortgage payment stays flat (taxes and insurance aside). This calculator's rent-growth input is one of the most consequential fields.
What does the 5% rule mean for renting vs buying?
The 5% rule compares a home's unrecoverable costs - property tax (~1%), maintenance (~1%), and the mortgage interest or opportunity cost of the down payment (~3%) - with rent. If annual rent is below 5% of a comparable home's price, renting is often cheaper. It is a screening tool, not a verdict.
How long do I need to stay in a home for buying to pay off?
The common break-even is 5-7 years, because the one-time costs (closing fees, moving, the 5-6% selling commission) are spread over the stay. Sell in year 2 and those costs swamp any equity built. If your life is likely to change within 3-4 years, renting is usually the safer financial choice.