Rent vs. Buy Calculator
Compare the long-term wealth of renting and investing vs. buying. Factor in interest rates, down payments, home appreciation, rent inflation, stock market returns, and transaction fees.
Home Purchase Inputs
Rental Inputs
Growth & Assumptions
Comparison Schedule
| Year | Home Value | Mortgage Debt | Buyer Net Worth | Renter Net Worth | Rent Paid | Buyer Advantage |
|---|---|---|---|---|---|---|
| 1 | $364,000.00 | $276,561.57 | $65,598.43 | $87,207.88 | $21,600.00 | -$21,609.45 |
| 2 | $378,560.00 | $272,911.06 | $82,935.34 | $97,783.18 | $43,848.00 | -$14,847.84 |
| 3 | $393,702.40 | $269,035.40 | $101,044.86 | $108,744.05 | $66,763.44 | -$7,699.19 |
| 4 | $409,450.50 | $264,920.69 | $119,962.78 | $120,109.83 | $90,366.34 | -$147.05 |
| 5 | $425,828.52 | $260,552.20 | $139,726.61 | $131,901.14 | $114,677.33 | $7,825.46 |
| 6 | $442,861.66 | $255,914.27 | $160,375.69 | $144,140.04 | $139,717.65 | $16,235.65 |
| 7 | $460,576.12 | $250,990.28 | $181,951.27 | $156,850.04 | $165,509.18 | $25,101.23 |
| 8 | $478,999.17 | $245,762.59 | $204,496.63 | $170,056.31 | $192,074.46 | $34,440.32 |
| 9 | $498,159.13 | $240,212.47 | $228,057.12 | $183,785.73 | $219,436.69 | $44,271.39 |
| 10 | $518,085.50 | $234,320.03 | $252,680.34 | $198,067.09 | $247,619.79 | $54,613.25 |
Understanding the Rent vs. Buy Math
To make a fair comparison, the calculator assumes you have the cash required for a down payment and buying closing costs. The renter invests this entire amount immediately in the market. Each month, whichever path is cheaper (renting or buying) contributes the monthly savings to their respective investment portfolio.
Key Factors
- Appreciation vs. Stock Returns: Real estate historical gains are typically lower than broad stock indexes, but mortgage leverage amplifies home equity growth.
- Non-recoverable Costs: Rent is entirely non-recoverable. For the buyer, mortgage interest, property taxes, insurance, maintenance, and buying/selling transaction fees are also non-recoverable.
- Time Horizon: The longer you plan to stay in the home, the more favorable buying becomes, as upfront purchase fees get amortized over more years.
Frequently asked questions
Is it better to rent or buy a home?
Renting is often better in the short term due to low transactional costs, whereas buying usually yields a higher net worth in the long run (typically 5 to 10+ years) because home value appreciation and principal payoff build equity, eventually outpacing the costs of maintenance, interest, and buying fees.
What is the opportunity cost of buying a home?
The opportunity cost refers to the returns you could have earned if you invested your down payment and buying closing costs in the stock market instead of locking them up as home equity, plus any difference in monthly cash flows if renting is cheaper than buying.
What does the Rent vs. Buy break-even year mean?
The break-even year is the point in time where the cumulative net worth of the buyer exceeds the cumulative net worth of the renter. Before this point, renting is financially superior due to transaction fees and interest; after this point, buying becomes more profitable.