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Rent vs. Buy Calculator
Buying builds equity; renting frees cash to invest. This rent vs buy calculator follows both paths dollar for dollar — your net worth if you buy against renting and investing the difference — and pinpoints the year buying pulls ahead.
See how this works on a $400,000 house vs. a $2,400 rental — 3 real examples
Your scenario
Your timeline
The home you'd buy
Owning costs
The rental you'd compare
Invest the difference
Net-worth difference after 10 years
$0ahead if you buy
If you buy
$0
If you rent & invest
$0
Break-even
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Net worth over time: buy vs. rent
Hover or tap for exact values
Year-by-year net worthBoth paths, year by year
| Year | If you buy | If you rent & invest | Buy advantage |
|---|
How your rent vs. buy break-even is calculated
Both paths start with the same cash and are simulated month by month across your whole horizon:
Buy net wortht = home valuet × (1 − selling cost%) − loan balancet
Rent net wortht = portfoliot, where monthly: portfolio ← portfolio × (1 + i) + (owner cost − rent)
The buyer puts the down payment into the house and pays the standard amortizing payment PMT = L·r / (1 − (1 + r)−n) with r = APR / 12, plus property tax and maintenance (each a percentage of the home’s current value, so they rise as it appreciates), insurance and HOA dues. The home’s value compounds monthly at (1 + a)1/12 − 1. The renter invests the down payment instead and earns the effective monthly rate i = (1 + R)1/12 − 1; each month the portfolio absorbs the signed difference between the full cost of owning and rent, so when renting is cheaper the portfolio grows, and when rent overtakes owning it is drawn down. Rent steps up once a year. The break-even year is the first year buy net worth is at least rent net worth.
Deliberate simplifications, so you know exactly what you’re looking at:
- Selling costs are deducted from the home’s value in every year’s figure, so each row answers “what if I sold this year?”
- No PMI is modeled — with less than 20% down, real ownership costs are slightly higher than shown.
- No income-tax effects: the mortgage-interest deduction is ignored because roughly nine in ten filers take the standard deduction. Itemizers do somewhat better buying than shown.
- Buyer closing costs at purchase, security deposits and renters insurance are excluded; the first slightly favors buying, the last slightly favors renting.
- Homeowners insurance is held flat rather than inflated.
The break-even year, moved three ways
A $400,000 house against a $2,400 rental, ten years out. Small changes to rent and market returns move the crossover — or erase it.
Buying pulls ahead in year four
the break-even yearYear 4
- Through year three the renter is richer — $115,649 to $114,414 at the close of year three.
- Year four flips it: $135,676 for the owner against $128,098 for the renter.
- By year ten the gap is $76,053 in the owner’s favor.
The crossover comes in year four; every year after that widens it.
Load this example (opens in a new tab)Rent at $1,800 changes the answer
within the ten-year horizonNever
- Six hundred dollars less rent, invested at 7%, compounds past the house every single year.
- At year ten the renter holds $324,973 to the owner’s $285,288.
- The gap is $39,685 the other way, and it is still widening.
The rule of thumb hiding here: when rent is far below the cost of owning, renting wins.
Load this example (opens in a new tab)The renter’s money earns 10%
the break-even yearYear 6
- Three extra points of return keep the renter in front through year five.
- Buying still gets there in year six, two years later than the base case.
- The ten-year gap shrinks from $76,053 to $15,112.
A better market for the renter’s money delays the crossover; here it doesn’t cancel it.
Load this example (opens in a new tab)Illustrations only, not financial advice. Your own rate, taxes and insurance will differ — check with a qualified financial advisor before acting on any of this.
Rent vs. buy, in plain English
- It’s a break-even year, not a verdict. The honest answer is the first year buying pulls ahead — drag the how-long-you’ll-stay slider and watch the crossover move.
- Count only money that disappears. Interest, property tax, insurance, maintenance and selling costs build no equity; the principal you pay comes back when you sell.
- Your down payment isn’t free. Invested at 7%, $80,000 grows to about $157,000 in a decade — buying has to beat that portfolio to win.
- Rent never sits still. At 3% growth today’s $2,400 becomes roughly $3,225 in ten years, while a fixed principal-and-interest payment never moves.
- Transaction costs punish short stays. Roughly 2–5% to buy and 5–7% to sell get spread across more years the longer you stay put.
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Frequently asked questions
Is it better to rent or buy a home?
It comes down to a few key factors: how long you stay, the rent-to-price ratio in your market, and what the renter does with the saved cash. With the default inputs — a $400,000 home versus $2,400 rent — buying pulls ahead well before year ten, but a shorter stay, a hot stock market, or a cheap rental can flip the answer. That is why this calculator draws the full wealth trajectory instead of giving a one-word verdict.
What is the break-even point for buying vs renting?
It is the first year the buyer’s net worth — home value minus selling costs and the remaining loan balance — catches up to the renter’s investment portfolio. This calculator marks it on the chart and recomputes it live as you drag any slider. Before that year, selling and moving out would leave you poorer than if you had rented.
How long do I need to stay in a home to make buying worth it?
A common rule of thumb is five years, because roughly 8–10% of the home’s value is consumed by round-trip transaction costs (2–5% to buy, 5–7% to sell). Your actual break-even depends heavily on rent growth versus investment returns: high rent growth can pull it under five years, while cheap rent and strong market returns can push it past a 30-year horizon entirely.
Should I invest my down payment instead of buying?
That is exactly the alternative this calculator prices. The rent scenario seeds a portfolio with your full down payment — $80,000 at a 7% return grows to about $157,000 in 10 years — and then adds (or withdraws) the monthly cost difference between owning and renting. Buying has to beat that portfolio through leveraged appreciation, principal paydown, and rent avoided to come out ahead.
Does the calculator account for tax benefits of owning?
No, deliberately. Since the standard deduction was roughly doubled in 2018, only about one in ten filers itemizes, so most homeowners get no extra tax benefit from mortgage interest or property tax. If you do itemize — typically with a large loan in a high-tax state — buying is somewhat better than shown here.
What ongoing costs of owning do people underestimate?
Maintenance is the big one — the standard 1%-of-value rule is about $4,000 a year on a $400,000 house, and it rises as the home appreciates. Property tax creeps up with value too, and selling eventually costs 5–7% of the price. None of these build equity, which is why a mortgage payment lower than rent does not automatically mean buying wins.
Why can renting win even when the mortgage payment is lower than rent?
Because the sticker payment is not the real cost of owning. Interest, property tax, insurance, maintenance and eventual selling costs build no equity, and the renter’s portfolio keeps compounding on the down payment the whole time. When those phantom costs plus foregone investment returns exceed the equity you build, renting stays ahead — the chart makes that visible year by year.
Disclaimer: these calculators are educational tools, not financial advice. They model your inputs with published formulas, but they cannot know your full situation — for decisions with real stakes, talk to a qualified professional. Formulas and defaults last reviewed .