This rent vs buy calculator compares the true net cost of both paths over the years you will actually stay: mortgage, taxes, maintenance and selling costs minus the equity you walk away with — versus rent paid minus what your un-spent down payment could earn invested.

Net Cost of Buying–
Net Cost of Renting–
Verdict–
Equity You Keep if Buying–

Model: 30-year mortgage; buying costs include 3% closing, 1%/yr maintenance, 1.5%/yr property tax + insurance (on price), and 6% selling costs, offset by net sale proceeds. Renting invests the would-be down payment + closing at your investment return. Monthly cash-flow differences are not reinvested — a deliberate simplification, so treat results as close comparisons, not prophecies.

Why This Comparison Is Subtler Than It Looks

Naive comparisons pit rent against the mortgage payment and stop — missing that buying front-loads huge transaction costs (closing + selling ≈ 9% of the price), that early mortgage payments are mostly interest, and that renting leaves your down payment free to compound. The fair fight, which this calculator runs, is net cost over your actual stay: everything paid out, minus everything recovered (equity for buyers, investment growth for renters). The mortgage math itself lives in our Mortgage Calculator and the upfront cash in the Down Payment Calculator; all are part of our Finance Calculators collection.

Worked Example (Verified, 7-Year Stay)

$400,000 home, 20% down, 6.5% mortgage, vs. $2,000/month rent (3% annual increases, investments at 5%):

  • Mortgage on $320,000: $2,023/month; after 7 years the balance is $289,332 (you paid $139,232 in interest and only $30,668 in principal — early years are like that)
  • Home appreciated to $491,950; selling nets $173,101 after costs and the remaining loan
  • Net cost of buying ≈ $158,799 vs net cost of renting ≈ $146,446
  • At this short horizon and high rate, renting wins by ≈ $12,353 — extend the stay toward 10+ years in the widget and watch the verdict flip as equity and appreciation overtake the fixed transaction costs

The Variables That Flip the Verdict

  • Time horizon is king. Buying's ~9% round-trip transaction costs need years of equity-building to amortize. Under ~5 years, renting usually wins; beyond ~8–10, buying usually does (at typical rates).
  • The price-to-rent ratio: if the home costs more than ~20× its annual rent, renting is financially favored; below ~15×, buying is. (This example sits at 16.7× — genuinely borderline, hence the close result.)
  • Rates: at 3% mortgages the interest drag halves and buying wins years earlier; at 8% the opposite.
  • Non-financial factors are real: stability, control, forced saving (a mortgage is a savings plan you cannot skip) versus flexibility and zero maintenance. The calculator prices the money; you price the life.

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Frequently Asked Questions

Is it better to rent or buy?

It hinges mainly on how long you will stay and the local price-to-rent ratio. Short stays favor renting (transaction costs dominate); long stays favor buying (equity and appreciation compound). Run your own numbers above — the defaults show a 7-year case where renting narrowly wins.

What is the 5-year rule for buying a house?

The folk rule that buying pays off if you stay at least ~5 years — the time needed for appreciation and principal paydown to offset buying + selling costs. At high rates or low appreciation, the true breakeven runs longer.

Does this calculator include taxes and insurance?

Yes — property tax and homeowner's insurance are modeled at 1.5% of the home price per year, plus 1% maintenance, inside the buying cost.

Why credit renters with investment returns?

Because the renter keeps the down payment liquid. Ignoring its growth would quietly hand buying an unearned advantage — the money has an opportunity cost either way.

What about the mortgage interest tax deduction?

Not modeled — its value varies hugely (many buyers take the standard deduction and get no benefit from it). If you itemize and are in a high bracket, buying's cost drops; treat the calculator's verdict as conservative in that case.

Is this rent vs buy calculator free?

Yes — free, instant, no sign-up. It is a simplified model for education, not financial advice.