How the rent vs buy comparison works
Comparing rent to a mortgage payment is misleading, because part of each mortgage payment is savings (principal) and owners pay many costs renters don't. This calculator runs a fairer test: it follows two versions of you, month by month, for as long as you plan to stay.
- The buyer pays the down payment and closing costs up front, then the mortgage, property tax, insurance, maintenance and any HOA fee. The home grows in value at the rate you set. At the end, the home is sold, selling costs and the remaining mortgage are deducted, and what's left is the buyer's net worth.
- The renter invests the money the buyer spent up front. Each month, if owning costs more than renting, the renter invests the difference; if renting costs more, the buyer invests the difference instead. Both portfolios grow at your chosen investment return.
The option with the higher net worth at the end is the better financial choice under your assumptions — and the break-even year shows how long you need to stay for buying to pay off.
The assumptions that matter most
How long you'll stay
Buying and selling a home typically costs several percent of its value each way — legal fees, transfer taxes, lender fees and agent commissions. Those costs are spread over every year you own, so the longer you stay, the more likely buying wins.
Price-to-rent ratio
Divide the home price by a year's rent for a similar home. When the ratio is low (homes are cheap relative to rents), buying tends to win quickly. When it's high — common in expensive coastal cities — renting and investing the difference can stay ahead for a long time.
Home appreciation vs investment returns
Owners benefit from leverage: a 3% rise in a home bought with 20% down is a 15% gain on the cash invested, before costs. Renters benefit from flexibility and from markets that have historically grown faster than house prices in many places. Small changes in either rate move the result a lot, so try a pessimistic and an optimistic scenario.
Maintenance
Roofs, boilers, appliances and repairs add up. Budgeting 1%–2% of the home's value per year is a common rule of thumb; older homes usually need more.
Non-financial factors
Money isn't the only consideration. Owning offers stability, control over renovations and protection from rent increases. Renting offers flexibility to move for work, no surprise repair bills and less money tied up in one asset. Use the numbers to understand the trade-off, then decide what fits your life.