Rent vs. Buy Calculator
Compare the total cost of renting against buying over your expected time in the home.
About Rent vs. Buy Calculator
This calculator computes the true total cost of each path over your chosen horizon. Buying costs include mortgage payments, taxes, insurance, maintenance, closing costs and selling costs, offset by the equity you build and the home's appreciation. Renting costs include all rent payments plus the opportunity cost of the down payment — the investment return you forgo by not investing it. This opportunity cost is real money that most simplified comparisons ignore.
Formulas
Net buying cost
Net Buying = (All mortgage payments + taxes + insurance + maintenance + closing costs) − Equity at sale
Net renting cost
Net Renting = Total rent paid + Opportunity cost of down payment
Opportunity cost
OC = (Down Payment + Closing Costs) × (1 + investment return)ⁿ − initial capital
- DP
- Down payment
- CC
- Closing costs
- r
- Annual investment return
- n
- Horizon in years
Worked example
With the default values below, Rent vs. Buy Calculator returns Better Financial Choice of Buying. Change any input above and every figure here is recalculated in your browser.
Inputs used
- Home Priceaccepts 10,000–10,000,000 $
- 400,000 $
- Down Paymentaccepts 0–100 %
- 20 %
- Mortgage Rateaccepts 0–20 %
- 6.5 %
- Loan Termaccepts 5–40 years
- 30 years
- Buying Closing Costsaccepts 0–10 % of home price
- 3 % of home price
- Annual Property Taxaccepts 0–5 % of home value
- 1.1 % of home value
- Monthly Homeowner's Insuranceaccepts 0–5,000 $
- 120 $
- Annual Maintenanceaccepts 0–5 % of home value
- 1 % of home value
- Annual Home Appreciationaccepts -10–20 %
- 3 %
- Selling Costsaccepts 0–15 % of sale price
- 6 % of sale price
- Monthly Rentaccepts 1–50,000 $
- 2,200 $
- Annual Rent Increaseaccepts 0–20 %
- 3 %
- Monthly Renter's Insuranceaccepts 0–500 $
- 15 $
- Assumed Investment Returnaccepts 0–30 % p.a.
- 7 % p.a.
- Time Horizonaccepts 1–50 years
- 10 years
Results
- Better Financial Choice
- Buying
- Cost Difference
- $182,042
- Net Cost of Buying
- $211,382
- Net Cost of Renting
- $393,424
- Monthly Mortgage Payment
- $2,022.62
- Equity at End of Horizon
- $234,029
- Estimated Sale Price
- $537,567
- Total Rent Paid
- $304,446
- Opportunity Cost of Down PaymentInvestment gain foregone by putting the down payment into a home instead.
- $88,978
Step by step
- 1Down payment + closing costs (initial cash out)= $92,000
- 2Equity at end of horizon (appreciated value − loan balance − selling costs)= $234,029
- 3Net cost of buying (total outflows − equity recouped)= $211,382
- 4Total rent + insurance paid= $304,446
- 5Opportunity cost ($92,000 at 7% for 10yr)= $88,978
- 6Net cost of renting (rent + opportunity cost)= $393,424
- 7Verdict= Buying is cheaper by $182,042
Assumptions and limits
- The result is derived only from the 15 inputs listed above. Anything not among them is not part of the calculation.
- In particular, this calculator does not take inflation into account.
- Figures are rounded for display to 2 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.
- This comparison model simplifies a complex decision. It excludes income tax effects, leverage risk, lifestyle factors and market volatility. Use it as a directional guide, not a definitive answer.
- This is an estimate for general information and not professional financial, tax or legal advice. See the full disclaimer for the limits that apply to this kind of calculator.
How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.
This comparison model simplifies a complex decision. It excludes income tax effects, leverage risk, lifestyle factors and market volatility. Use it as a directional guide, not a definitive answer.
Frequently Asked Questions
Why does the down payment matter for the renting calculation?
The down payment is capital that you could alternatively invest. By using it as a down payment you forgo those investment gains. This opportunity cost is one of the largest and most frequently omitted factors in rent vs. buy comparisons.
What investment return should I assume?
US large-cap equities have returned roughly 7% real (inflation-adjusted) annually over long horizons. A conservative assumption (5–6%) is appropriate for mixed portfolios. Using a high return (10%+) makes renting look better; using a low return makes buying look better. Try several scenarios.
Which choice is financially better?
It depends heavily on your horizon, local rent/price ratio, and how long you plan to stay. Shorter horizons (under 5 years) typically favour renting because buying costs are front-loaded. Longer horizons increasingly favour buying if home values keep up with or exceed inflation.
Does the calculator account for the mortgage interest tax deduction?
No. The deduction only applies if you itemize, and since the 2018 TCJA roughly doubled the standard deduction, fewer than 10% of filers now itemize. Including it would require knowing your marginal rate and deduction situation. For most buyers, the deduction's benefit is modest or zero.