Rent vs Buy Calculator – Compare Renting and Buying a Home
Compare the long-run cost of renting with buying a home over your time horizon.
About the Rent vs Buy Calculator
What is the Rent vs Buy Calculator?
A rent vs buy calculator compares the net cost of owning a home with the cost of renting over the period you expect to stay.
Why use this calculator?
Buying has high up-front costs and builds equity; renting is flexible and avoids maintenance. Which wins depends heavily on how long you stay and how the market moves.
How to use it
- Enter the home price, down payment and mortgage rate.
- Enter the rent you would otherwise pay.
- Set how many years you plan to stay and an appreciation assumption.
- Compare the net cost of buying with the total rent paid.
Formula
Net cost of buying = (down + payments) − equity; compare with total rent.
This is a simplified model. It ignores taxes, maintenance, insurance, transaction costs and investment returns on the down payment. Short stays usually favor renting.
Frequently Asked Questions
Why does the break-even point matter?
Buying has large up-front costs. You need to stay long enough to recover them through appreciation and principal paydown before owning beats renting.
What is not included in this comparison?
Property taxes, insurance, maintenance, HOA fees and the return you could earn investing the down payment. Including them usually lengthens the break-even period.
What is included in a monthly mortgage payment?
Most payments combine principal, interest, property taxes and homeowners insurance (often called PITI). Some loans also include private mortgage insurance (PMI).
What is PMI and when can I drop it?
Private mortgage insurance is usually required when your down payment is under 20%. You can typically request removal once you reach 20% equity.
Fixed versus adjustable rate — which is better?
A fixed rate keeps the same interest rate for the whole term, giving predictable payments. An adjustable rate starts lower but can rise after the initial period.
How much house can I afford?
A common guideline is that housing costs stay below 28% of gross monthly income and total debt below 36%, though lenders and budgets vary.
What is the difference between pre-qualification and pre-approval?
Pre-qualification is a quick estimate based on self-reported data. Pre-approval is a verified commitment after a lender reviews your finances.
What is compound interest?
Compound interest is interest earned on both your original money and on previously earned interest. Over time it can make savings grow much faster than simple interest.
What is the difference between nominal and effective return?
The nominal return ignores compounding within the year, while the effective (annualised) return accounts for it. The effective figure is usually higher and better reflects real growth.
How does inflation affect my returns?
Inflation erodes purchasing power. The real return is the nominal return minus inflation, so an investment can grow in dollars yet still lose value in what it can buy.