Rent vs Buy Calculator
Buying is cheaper than renting only after the equity and the transaction costs are counted, and only if you stay long enough. This finds the year it flips — and shows how much the answer depends on two assumptions nobody can know in advance.
Rent versus buy cost calculator
Net cost by holding period
| Years | Cost of owning | Cost of renting | Difference |
|---|
Break-even year at other assumptions
| Appreciation | 4% return | 6% return | 8% return |
|---|
Years until the cost of owning drops below the cost of renting. “Never” means renting wins across a 30 year horizon at that combination.
Cheaper per month is not cheaper
Renting almost always wins on the monthly number, and buying almost always wins on the long one, because part of every mortgage payment comes back to you as equity. A comparison that stops at the monthly payment is not a comparison, it is a cash-flow statement, and it will tell you to rent forever.
The method here compares the two the only way they can be compared: total cash out of pocket over the holding period, minus what you walk away with. For a buyer that means down payment, closing costs and every monthly cost, minus the net sale proceeds after the balance is paid. For a renter it means rent, minus the investment gain on the cash the buyer tied up.
How the numbers are built
The owning side is principal and interest plus property tax, insurance, HOA and maintenance, with the non-mortgage items escalating at 3 percent a year. The renting side is rent, escalated at your rent-growth rate. At the end, the house is sold at the appreciated value less 6 percent for commission and closing costs, and the remaining loan balance is subtracted to find the equity that comes back to you.
On the defaults — $400,000 house, 20 percent down, 6.5 percent, $2,200 rent — owning costs $2,873 a month against $2,200, a gap of $673. Over seven years owning costs $180,425 net and renting costs $155,955, so renting is ahead by about $24,000. The break-even year is 11.
The two assumptions that decide it
Nothing in this model matters as much as appreciation and investment return, and neither is knowable. At 3 percent appreciation and a 6 percent return on the down payment, renting wins for a decade. Drop the return to 4 percent and the break-even moves to year 8. Raise appreciation to 5 percent and it moves to year 6.
That sensitivity is the honest answer to the rent-versus-buy question: it is not a fact about housing, it is a bet on two rates. Anyone who gives you a single number without showing this table is selling something.
What this model leaves out
The mortgage interest deduction, which reduces the effective cost of owning for itemizers but does nothing for the roughly 90 percent of taxpayers who take the standard deduction. Mortgage insurance, which adds $150 to $250 a month below 20 percent down. Rent control, which can hold rent growth near zero for a long tenancy. And the non-financial parts — the ability to renovate, the risk of a forced move, the fact that a mortgage payment is fixed while rent is not.
It also assumes you sell at the end of the horizon. If you stay for 30 years, the transaction costs of buying and selling spread over a longer period and the owning side usually wins comfortably. The 5 to 8 year window is the hard case, which is exactly why it is the default.
Frequently asked questions
Is it cheaper to rent or buy?
It depends on how long you stay and on two assumptions. At 3 percent appreciation and a 6 percent return on the down payment, owning takes about 11 years to beat renting on total cost. At 5 percent appreciation it takes about 6 years.
How is the break-even year calculated?
Each year, total cash out for owning — down, closing and every monthly cost, minus equity at sale — is compared with rent paid minus the investment gain on the cash a buyer would have tied up. The first year owning is lower is the break-even.
Should I include the mortgage interest deduction?
Only if you itemize. Since the standard deduction rose, most homeowners take it and get no benefit from mortgage interest, so the default here leaves the deduction out.
Why does the calculator count the down payment as an investment return?
Because a renter keeps that money and can invest it. Ignoring that gain makes buying look better than it is, which is the most common flaw in rent-versus-buy calculators.
How long do I need to stay to make buying worth it?
Five to seven years covers the transaction costs at moderate appreciation, which is the traditional rule. At low appreciation or a high expected investment return, the honest answer can be ten years or more.
What maintenance should I assume?
One percent of the home value per year is the usual planning figure, or about $333 a month on a $400,000 house. New construction needs less in the first decade; a 1970s house with original systems needs more.
Does this include HOA dues?
The model has a place for them, but the default is zero. If you are comparing a condo with a $350 monthly HOA, add it on the owning side — it is a real cost that builds no equity.
Disclaimer: This calculator compares two financial scenarios from the assumptions you enter. Appreciation, investment returns and rent growth are guesses, not forecasts, and small changes move the answer by years. It is not financial advice.
Citing this page? FigureMill, “Rent vs Buy Calculator” (last reviewed October 31, 2026). Rent versus buy net cost over a chosen holding period, including equity, selling costs and the opportunity cost of the down payment. https://figuremill.com/home-tax/rent-vs-buy-calculator
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