Rent vs Buy Calculator

Renting feels cheaper this month; buying usually wins eventually, the real question is when the lines cross. This rent vs buy calculator turns your home price, down payment, mortgage rate and current rent into a head to head total: the full cost of buying (down payment, an estimated 2% closing cost, and every mortgage payment) against the full cost of renting (your rent, compounded each year by the increase you set). It then finds your breakeven year, the first year buying becomes the cheaper of the two, plus the home value, remaining loan balance and equity you would hold at the end of your comparison period. The math is deliberately transparent: no hidden assumptions, and the guide below names everything it leaves out, from property tax to maintenance. Use it as the starting point for the biggest money decision most people ever make, not the final word, a lender and a local agent still earn their place in the process. The comparison weighs the full cost of buying, down payment, closing costs and every mortgage payment, against rent that grows each year, tracks the home equity you build, and pinpoints the breakeven year when buying finally pulls ahead.

Last updated: October 22, 2026

Written by Ateeq Fareedi · Last updated October 22, 2026

The formula

Monthly payment (P&I) = P × r(1+r)^n / ((1+r)^n − 1), where P = loan amount, r = monthly rate, n = number of payments
Total buying cost = down payment + closing costs (2% estimate) + monthly payment × months compared
Total renting cost = year-one annual rent grown each year: rent × 12 × ((1+g)^y − 1) / g, where g = annual rent increase
Breakeven year = the first year in which total buying cost ≤ total renting cost
Home value after y years = price × (1 + appreciation)^y; equity = home value − remaining loan balance

A worked example

A $400,000 home with 20% down ($80,000) at 6.5% over 30 years means a $2,022.62 monthly payment. Over 10 years buying costs about $330,714 (down payment, estimated closing costs and payments) versus $302,646 of rent at $2,200/month growing 3% a year, renting wins by roughly $28,068 at year 10, but buying pulls ahead in year 13 and never looks back.

More about the Rent vs Buy Calculator

How the comparison actually works

Forget comparing this month's rent to this month's mortgage payment. That misses the down payment entirely, and the down payment is usually the biggest single number in the whole decision. This calculator compares cumulative totals instead: everything you will have spent buying (down payment, an estimated 2% for closing costs, and each monthly principal and interest payment) against everything you will have spent renting (your rent, rising each year by the increase you enter).

Buying starts deep in a hole, $80,000 down plus closing costs on a typical purchase, and climbs slowly because the mortgage payment is fixed. Renting starts at zero and climbs faster because rent compounds. Where the two curves cross is your breakeven year, and it is the single most useful number on the page.

The breakeven year, explained

The breakeven exists because the two cost curves have different shapes. Early on, the down payment dominates and renting wins easily. But a fixed mortgage payment stays flat while rent rises 3% a year, after a decade that compounding has added roughly 34% to the annual rent, so the renting curve eventually overtakes the buying one. With typical US numbers the crossing lands somewhere between years 5 and 15.

Three things move it most: a bigger down payment pushes breakeven earlier (less to finance), a higher mortgage rate pushes it later (more interest to overcome), and faster rent growth pushes it earlier (renting gets expensive sooner). Play with each input and watch the breakeven year move. That sensitivity is the real insight, not any single answer.

What the calculator leaves out, on purpose

No calculator can hold the whole picture, so here is what this one deliberately excludes: property tax, homeowner's insurance, maintenance (budget roughly 1% of the home's value per year), HOA fees, and the opportunity cost of the down payment (money that could have been invested). Each of those favors renting slightly, so treat the buying total as a floor rather than a ceiling.

On the other side, it also excludes the renter's opportunity: investing the down payment instead of spending it. If you would genuinely invest that money at a decent return, renting looks better than the numbers here suggest. The honest answer is that both sides have hidden costs. This tool keeps the visible ones exact and names the rest.

Down payment size changes everything

A 20% down payment is the classic benchmark because it usually avoids private mortgage insurance (PMI), but it also means handing over the largest check. Smaller down payments, 10%, 5%, or 3.5% FHA style, keep cash in your pocket but raise the monthly payment and, below 20%, typically add PMI until you reach 20% equity. The calculator accepts any down payment from 0 to 99% so you can compare strategies directly.

Run it twice: once with 20% down and once with 10%. You will see the breakeven year shift, and you can weigh that shift against what you would do with the freed up cash. There is no universally right answer, only the trade off that fits your savings and risk tolerance.

Rent growth is the silent variable

Most people guess their rent, then forget it grows. US rents have risen roughly 3% a year over the long run, and in hot markets much faster. At 3%, a $2,200 rent becomes about $2,955 a month after 10 years; at 5%, it becomes $3,584. That compounding is the main engine that eventually makes buying win.

Be honest with the rent increase input: check what your landlord has actually raised the last few years, or what your city's trend looks like. If you are in a rent controlled unit with capped increases, say so to yourself, the calculator's breakeven will move later, and that is correct.

Putting the verdict to work

Use the breakeven year against your real plans. If you will likely move in 3 years for work and the breakeven is year 9, renting is the clear answer, selling that early also means paying agent commissions that this estimate does not include. If you plan to stay 15 years and the breakeven is year 7, buying deserves serious consideration.

Then take the numbers to a lender for a pre approval and to a local agent for actual prices. This calculator is an educational estimate, not financial advice. Markets, tax rules and your own career are all moving parts no formula can freeze.

How to use the Rent vs Buy Calculator

Enter the home price, your down payment percent, the mortgage rate and the loan term.
Enter your current monthly rent and the annual rent increase you expect.
Set how many years to compare, match it to how long you might stay.
Press Calculate to see the verdict, the breakeven year, and the equity you would build.

Frequently asked questions

Is buying a house always better than renting?

Usually not, it mostly comes down to how long you will stay. Buying tends to win over long stretches because the mortgage payment stays fixed while rent compounds upward. The calculator finds your breakeven year, the point where buying becomes the cheaper option. If you expect to move before that year, renting is typically the better financial call.

How is the breakeven year calculated?

The calculator stacks up cumulative costs year by year. On the buying side: down payment, an estimated 2% in closing costs, plus every monthly principal and interest payment so far. On the renting side: your rent, compounded annually at the increase rate you enter. The breakeven year is simply the first year the buying total comes in at or below the renting total.

What is the 5% rule for rent vs buy?

It is a shortcut that says the unrecoverable costs of owning run about 5% of the home's value each year, roughly 1% property tax, 1% maintenance and 3% cost of capital. If your annual rent sits well below 5% of the purchase price, renting often wins; well above it, buying usually wins. The calculator just replaces the rule of thumb with your actual numbers.

Does the calculator include closing costs?

Yes, as a stated 2% estimate of the home price, added to the buying total up front. Real US closing costs usually land between 2% and 5% depending on the state and lender, so treat the buying total as a conservative floor, and adjust upward in your head if your quote runs higher.

Does it include property tax and insurance?

They are not in there. The monthly figure covers principal and interest only, property tax, homeowner's insurance, PMI and HOA fees are all real costs of owning, and each one pushes the breakeven year a little later. Add your local estimates on top of the buying total for a fuller picture.

What rent increase should I assume?

Around 3% a year matches the long run US average, which is the default. Use your own history if you have it: 5% in a hot market moves the breakeven year noticeably earlier, while a rent controlled unit with capped increases moves it later.

What home appreciation rate is realistic?

US homes have appreciated roughly 3 to 4% a year in nominal terms over the long run, which is why 4% is the default. Appreciation builds your equity but does not change the breakeven year in this comparison. It changes your net worth at the end, shown as "equity built".

How long should I plan to stay for buying to make sense?

Longer than your breakeven year, typically 5 to 10 years with normal US numbers, but run your own. Selling early also triggers agent commissions (often 5 to 6% of the price) that this estimate does not include, which is another reason short stays favor renting.

Does the calculator count what my down payment could earn if I invested it instead?

No, it deliberately leaves out the opportunity cost of the down payment, along with property tax, insurance, maintenance, and HOA fees, and the guide below names every exclusion. Since each of those costs favors renting slightly, you can think of the buying total as a floor rather than a ceiling. If you want to stress test the decision, try the comparison with a higher rent increase and watch how much the breakeven year moves.

What is the price to rent ratio and how do I use it?

Divide the home price by annual rent. Under 15, buying usually wins for anyone staying a few years; 15 to 20 is the judgment zone; above 20, renting usually wins unless you stay long term or appreciation runs hot. At 7.4% mortgage rates, many US markets sit above 20, which is why renting wins the 10 year math in expensive cities.

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