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Results are hypothetical illustrations based on the numbers you enter and simple assumptions: constant rates and returns, with no taxes or fees unless stated. They are not predictions or guarantees; real returns vary and can be negative. Educational content only. Not financial advice. Examples are hypothetical, not guaranteed. See our Disclaimer.
Quick answer: On a hypothetical $400,000 home with 20% down at 6.5%, versus renting a similar place for $2,500 a month, buying pulls ahead in year 8. Stay 10 years and buying costs about $24,252 less; leave after 5 and renting wins by about $13,362. Hypothetical, not guaranteed.
What this rent vs buy calculator does
It compares the true cost of renting and buying the same kind of home over the years you plan to stay. Buying costs include the mortgage, property tax, insurance, HOA, maintenance and the costs to buy and later sell. Renting costs are your rent, but the renter keeps the down payment invested. The calculator counts both sides, then shows a break-even year: the first year buying comes out cheaper.
How to use it
- Enter the home price, down payment, mortgage rate and loan term.
- Add property tax, insurance, HOA and maintenance (1% of the home’s value a year is a common starting point).
- Enter the rent for a similar home, how fast rents rise, and what you’d earn investing instead.
- Set how many years you’ll stay. The result, break-even year and table update instantly.
“Net cost” means everything you paid minus what you walk away with: for a buyer, the home equity left after selling costs; for both, the investments built from money not spent.
Worked example
Inputs: $400,000 price, 20% down ($80,000), 6.5% for 30 years, 1.1% property tax, $1,800/year insurance, no HOA, 1% maintenance, 3% appreciation, 3% closing and 6% selling costs. Renting: $2,500 a month rising 3% a year, investments earning 7%.
- Mortgage payment: $2,022.62 (principal + interest).
- Month 1 all-in cost to own: $2,872.62 vs $2,500 rent.
- Cash up front: $92,000 ($80,000 down + $12,000 closing), which the renter invests instead.
| Year | Net cost renting | Net cost buying | Ahead |
|---|---|---|---|
| 1 | $23,203 | $55,615 | Rent |
| 3 | $69,946 | $93,848 | Rent |
| 5 | $117,260 | $130,622 | Rent |
| 7 | $165,315 | $165,764 | Rent |
| 8 | $189,665 | $182,647 | Buy |
| 10 | $238,934 | $214,682 | Buy |
Break-even is year 8. After 10 years buying is about $24,252 cheaper. Change one input, like rent or the investment return, and the answer can flip, which is why the calculator is worth running with your own numbers.
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Questions people ask
Is it better to rent or buy a house?
It depends on how long you stay, the price compared with rent, and what your money would earn invested. In our example ($400,000 home vs $2,500 rent) buying pulls ahead in year 8; leave after 5 years and renting is about $13,362 cheaper. Hypothetical, not guaranteed.
How do you calculate rent vs buy?
Add up every cost of owning (mortgage, property tax, insurance, HOA, maintenance, closing and selling costs) and subtract the equity you keep when you sell. Compare that with the rent you pay minus what the renter earns by investing the down payment and any monthly savings.
What is the 5% rule for renting vs buying?
A rule of thumb: owning has yearly unrecoverable costs of about 5% of the home’s value (roughly 1% property tax, 1% maintenance and 3% cost of capital). On a $400,000 home that is $20,000 a year, about $1,667 a month. Rent below that often favors renting.
How long do you need to live in a house for buying to be worth it?
Often 5 to 10 years, because buying and selling costs take years to earn back. In our example the break-even is year 8. A higher rent, faster appreciation or a lower investment return brings it sooner.
What is the price-to-rent ratio?
The home price divided by a year of rent for a similar home. $400,000 ÷ $30,000 (12 × $2,500) = 13.3. A common rule of thumb says under about 15 leans toward buying and over about 20 leans toward renting.
Does the calculator count the down payment’s opportunity cost?
Yes. The renter keeps the down payment and closing costs ($92,000 in our example) invested at the return you enter, and whichever side pays less each month invests the difference. That is the cost most quick comparisons leave out.