Rent vs. Buy Calculator

Enter the price of the home you are weighing, the rent on a similar home and how long you expect to stay. The calculator follows two households with the same money, one that buys and sells at the end of the stay and one that rents and invests what buying would have tied up, and reports which ends up with more and by how much. It also finds the rent at which the two would finish level, and every stay up to 40 years for which buying comes out ahead. The defaults describe a 385,000 home bought with 20% down at 6.5% over thirty years, against 2,200 a month of rent for ten years; buying ends 19,349 ahead.

Two households, one budget

The buyer pays the down payment and the costs of buying, so the renter invests exactly that sum on the first day. Each month both pay for their housing, and whichever pays less invests the difference at the same return. At the end of the stay the buyer sells, pays the selling costs and clears what is left of the mortgage; the renter keeps the investments.

gap = V × (1 − s) − B − (D + C) × (1 + r)^N + Σ (rent_m − own_m) × (1 + j)^{12N − m}

Here V is the sale price after N years, s the selling costs, B the balance still owed, D the down payment and C the buying costs. The sum runs over every month m of the stay, taking that month's rent less that month's cost of owning, and grows each difference to the end at j, the monthly rate that compounds to the yearly return r. Whichever household invests a month's difference, the other would have spent it, so only the difference matters. That also makes the gap move in a straight line with the rent, which is why the calculator can solve exactly for the rent that closes it.

Working the default example through

Buying takes 88,550 of cash: the 77,000 down payment and 11,550 of buying costs, which becomes the renter's opening investment. The first month of owning costs 2,780.94: 1,946.77 of principal and interest on the 308,000 loan, 352.92 of property tax, 160.42 of insurance and 320.83 of maintenance. Rent is 2,200, so the renter invests 580.94. Rent rises 3% a year and so do the tax, insurance and maintenance, which follow the home's value, but the mortgage payment stays fixed, so the monthly gap narrows. In year ten owning still costs 3,035.17 a month against rent of 2,870.50, so the renter has invested something every month.

After ten years the home is worth 517,407.81. Selling costs take 31,044.47 and 261,110.47 is still owed, leaving the buyer 225,252.87. The renter's 88,550 has grown to 144,238.62 and the monthly savings to 61,665.02, which comes to 205,903.64. Buying is 19,349 ahead, the difference between the two figures as displayed in whole units. All of these are amounts in year-ten money.

The break-even rent is 2,089.35: if a similar home rents for less, the renter finishes ahead after ten years. Renting leads by 31,907 after one year, because the costs of buying and selling come out first, and still by 3,981 after seven, before buying moves 2,986 ahead in year eight.

What owning costs each month

Principal and interest are fixed for the term and stop once the loan is repaid. Property tax, home insurance and maintenance are entered as yearly rates on the home's value and charged on its value at the start of each year. The service charge rises each year with rent, so 100 a month of it costs the buyer exactly what 100 more of rent would cost the renter: it lifts the break-even rent to 2,189.35 and cuts the default lead to 1,862.

Mortgage insurance applies only while the down payment is under a fifth of the price, at the yearly rate you set on the original loan. It stops where the Homeowners Protection Act of 1998 ends it automatically: when the balance is first scheduled, on the loan's original amortization schedule, to reach 78% of the home's original value, and in any case after the midpoint of the term. A borrower in good standing can ask to cancel it at 80%; the calculator does not assume that. The Act covers single-family principal residences on loans closed from July 29, 1999, and FHA and VA loans follow their own rules. With nothing down at the default rate, the insurance runs for 156 payments, and the ten-year result swings to renting by 20,394.

The assumptions that decide it

The length of the stay matters most. At the defaults renting leads by 15,748 after five years and buying by 167,265 after twenty. The National Association of Realtors' 2025 survey found that sellers had owned their homes for a median of 11 years, an all-time high.

The investment return is set against the growth in the home's price. At 4% instead of 5%, buying's ten-year lead grows to 36,103; at 6% it shrinks to 1,193; at 7% renting leads by 18,473 and buying needs a stay of 16 years. Home price growth of 2% instead of 3% puts renting ahead by 19,865, and 4% puts buying ahead by 62,379. A mortgage rate of 7.5% leaves renting 18,793 ahead.

The lead can change hands more than once. With 1,800 of rent, a 4% mortgage, rent rising 2% a year and a 6% return, buying is ahead only for stays of 8 to 28 years, after which the renter's compounding takes over again. All figures are in the money of the year they arise; deflating both households by the same inflation rate shrinks the gap but never changes who is ahead.

Where the comparison comes from

National accounts have long treated an owner as a landlord renting to themselves. The US Bureau of Economic Analysis calls its imputed rent for owner-occupied housing the largest imputation in the accounts, a practice that "keeps GDP invariant as to whether a house is owner-occupied or rented", and values it as "the income the homeowner could have received if the house had been rented to a tenant".

Economists set that rent against the user cost of owning. James Poterba's 1984 paper in the Quarterly Journal of Economics treated a house as an asset and studied how taxes shape its cost; in his working paper's words, "A homeowner's imputed rent is not taxed, and mortgage interest payments are tax deductible", and rising expected inflation in the 1970s "could have accounted for as much as a thirty percent increase in real house prices". In 2005 Charles Himmelberg, Christopher Mayer and Todd Sinai argued that price-to-rent ratios "generally fail to reflect accurately the state of housing costs", and used instead "the imputed annual rental cost of owning a home, a variant of the user cost of housing". This calculator does the same for one household, adding the costs of moving in and out.

The growth assumption deserves caution. Robert Shiller found that real American home prices "rose 86% between the bottom in the fourth quarter of 1996 and the peak 9.25 years later in the first quarter of 2006", a boom he could not explain by rents or construction costs.

What is left out

Taxes are not modelled, since they depend on the country and the household. In the United States up to 250,000 of gain on a home owned and lived in as a principal residence for two of the previous five years is excluded from income, or 500,000 for many married couples filing jointly, while investment gains are taxed, so enter the return after tax. Mortgage interest helps only those who itemize deductions, and it is left out too.

So are a renter's deposit and insurance, moving costs, refinancing, adjustable rates, limits on how fast assessments can rise, and the risk of holding most of your wealth in one leveraged asset.

Outside the United States

In England and Wales council tax is owed by the people who live in a home, tenants included, and by the owner only when nobody does, so it costs a buyer nothing a renter would not pay: set the property tax to zero. Stamp Duty Land Tax, charged in England and Northern Ireland, belongs in the buying costs. On a £385,000 home it is £9,250, or £4,250 for a first-time buyer, about 2.4% and 1.1% of the price. A gain on a main home is usually free of Capital Gains Tax under Private Residence Relief. In Canada, CMHC prices its mortgage insurance at 2.80% to 4.00% of the loan when the loan is more than 80% of the value; add the premium to the buying costs as a share of the price and set the rate here to zero.

These figures are estimates for comparing scenarios, not a forecast or financial advice; real outcomes depend on future prices, rents, returns, taxes and costs. See the site disclaimer.

Frequently asked questions

Is it better to rent or buy a home?

It depends most on how long you stay, the rent on a similar home and what your money would earn invested. At the defaults, a 385,000 home with 20% down at 6.5% against 2,200 a month of rent, renting is ahead for the first seven years and buying is 19,349 ahead after ten, because the costs of buying and selling take years of equity to recover.

How long do I need to stay for buying to pay off?

At the defaults, eight years: renting is 3,981 ahead after seven years and buying is 2,986 ahead after eight. The calculator lists every stay up to 40 years for which buying is ahead, because the lead can change hands more than once, for example when investments compound faster than the house gains value.

What is the break-even rent?

It is the monthly rent, rising each year by the rent increase you set, at which buying and renting finish your stay level. At the defaults it is 2,089.35 a month: a similar home renting for less leaves the renter ahead after ten years, and one renting for more leaves the buyer ahead. Each 100 a month of service charge raises it by exactly 100.

Why does the calculator invest the difference?

So that both households spend the same. A renter would otherwise invest the down payment and buying costs, and each month whichever household pays less for housing invests the difference. Without that step renting looks worse than it is. It does assume the renter really invests the savings rather than spending them.

Does it include the mortgage interest deduction or tax on gains?

No, because taxes depend on the country and the household. In the United States up to 250,000 of gain on a main home, 500,000 for many married couples filing jointly, is excluded from income, while investment gains are taxed, so enter the investment return after tax. The mortgage interest deduction helps only those who itemize, and it is left out.

What investment return should I enter?

What you expect to earn after tax and fees on money you could leave invested for the whole stay. The answer is sensitive to it: at the defaults buying's ten-year lead is 36,103 at 4%, 19,349 at 5% and 1,193 at 6%, while at 7% renting is 18,473 ahead.

Sources

1. Assessing High House Prices: Bubbles, Fundamentals and Misperceptions, Journal of Economic Perspectives, American Economic Association, 2005
2. Why does GDP include imputations?, U.S. Bureau of Economic Analysis
3. Inflation, Income Taxes, and Owner-Occupied Housing, National Bureau of Economic Research, 1980
4. Understanding Recent Trends in House Prices and Home Ownership, National Bureau of Economic Research, 2007
5. First-Time Home Buyer Share Falls to Historic Low of 21%, Median Age Rises to 40, National Association of Realtors, 2025
6. Topic no. 701, Sale of your home, Internal Revenue Service
7. 12 U.S. Code § 4901 – Definitions (Homeowners Protection Act), Legal Information Institute, Cornell Law School