Rent vs. Buy Analyzer

Whether to rent or buy is rarely just a math question, but the math matters. The most common mistake in rent-vs-buy comparisons is ignoring opportunity cost: money tied up in a down payment can't compound in the stock market. A real comparison accounts for that.

What a real rent-vs-buy comparison includes

Buying costs include mortgage payment, property tax, insurance, maintenance (typically 1-2% of home value annually), HOA, and closing costs to sell (~6-8%). Renting costs include rent and renters insurance. The crucial extra: opportunity cost on the down payment. If you'd otherwise invest that money, factor in 6-7% annual real returns. The result is a true monthly cost comparison.

When to use this calculator

Use it before any home purchase decision, especially in expensive cities where price-to-rent ratios are high (above 20:1 typically favors renting). The breakeven horizon is typically 5-7 years; under that, transaction costs and forgone investment returns usually make renting win financially. Above 7-10 years and the math often flips.

Worked example

A $500,000 home with 20% down vs renting an equivalent property for $2,500/month. Buying: ~$3,800/month total carrying cost. Renting: $2,500 + lost compound return on the $100,000 down payment (~$580/month at 7%). Net cost gap: about $720/month, in favor of renting. The home needs to appreciate roughly 1.7%/year just for buying to break even financially.

Limits and assumptions

Each year the buying side accrues mortgage interest, maintenance at the percentage you set, property tax fixed at 1.2% of the home's value and insurance fixed at 0.5%, while the home appreciates at your rate. The renting side raises rent by your rent-increase rate and invests the down payment and closing costs you did not spend at your investment return. The two net-worth lines are compared year by year to find the break-even point.

The 1.2% and 0.5% assumptions cannot be changed, mortgage-interest and property-tax deductions are ignored, and every rate is held constant for the whole horizon. The comparison is before tax.

Frequently asked questions