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Rent vs Buy Calculator — Which Is Better for You?

Calculate the true cost of renting vs buying a home over your chosen time horizon

Buying Scenario

Renting Scenario

Renting Is Cheaper Over 5 Years
Save $275,575
Net of equity gained vs investment returns on down payment
Monthly Cost Comparison
Buy (all-in)$2,911/mo
Rent$2,200/mo
5-Year Net Cost
Net Buy Cost (after equity)$383,532
Net Rent Cost (after investment gains)$107,957
Equity & Investment
Home Equity After 5 Years$174,506
Down Payment Investment Growth$32,204
Break-Even Year
Year 17
When buying becomes cheaper than renting with investing

The True Costs of Homeownership

Most people focus on the mortgage payment when comparing renting vs. buying, but that's only part of the picture. The true monthly cost of owning includes: principal and interest on your mortgage, property taxes (averages 1-2% of home value annually), homeowner's insurance, private mortgage insurance (if down payment is under 20%), HOA fees (if applicable), and maintenance — budget 1% of home value per year for routine upkeep, more for older homes. These costs often add $500-1,500/month beyond the mortgage payment.

When Renting Beats Buying

Renting makes financial sense when: you plan to move within 5 years (transaction costs alone eat into any appreciation gains), the price-to-rent ratio is above 20 (home prices are high relative to rents), your down payment money can earn strong returns elsewhere, or buying would strain your budget and create financial stress. The New York Times Rent vs Buy Calculator, which inspired many tools like this one, shows that in most expensive coastal markets, renting wins for stays under 7 years.

The 5% Rule

Financial planner Ben Felix popularized the "5% rule" as a quick test: multiply the home's value by 5%, then divide by 12. If you can rent equivalent housing for less than that monthly amount, renting is likely better financially. The 5% accounts for property tax (1%), maintenance (1%), and opportunity cost of capital (3%). On a $400,000 home, that's $1,667/month — if you can rent the same home for less, renting may win.

The Opportunity Cost of the Down Payment

A $80,000 down payment (20% on a $400,000 home) invested in a diversified index fund returning 7% annually would grow to about $159,000 in 10 years — without any of the maintenance, property tax, or liquidity constraints of homeownership. This opportunity cost is one of the most overlooked factors in the rent vs. buy decision. Home equity also tends to be illiquid and poorly diversified, while investment portfolios provide flexibility and diversification.

Frequently Asked Questions

Is buying always better than renting long-term?
Not always. It depends on local price-to-rent ratios, your personal financial situation, how long you plan to stay, and what you'd do with your down payment. In high-cost cities, renters who invest their down payment often come out ahead over 10-15 years.
How does appreciation factor into the comparison?
Home appreciation varies wildly by market and time period. The national average is around 3-4% annually, but individual markets range from flat to 10%+. Our calculator uses your input, but be conservative — past appreciation doesn't guarantee future gains.
What are typical closing costs when buying?
Expect 2-5% of the home price in closing costs (loan origination, appraisal, title insurance, escrow, etc.). On a $400,000 home, that's $8,000-20,000 out of pocket on top of your down payment — costs you don't get back if you sell quickly.
At what point does buying start to beat renting?
Most analyses show buying becomes financially advantageous after 5-7 years in a typical market, once you've spread closing costs over enough time and built meaningful equity. In expensive markets, the break-even can stretch to 10+ years.
Should I include tax benefits of homeownership?
The mortgage interest deduction and property tax deduction are less valuable than they used to be — the 2017 tax law doubled the standard deduction, so most homeowners no longer itemize. Check with a tax professional for your specific situation.

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