How to Use the Rent vs Buy
Renting vs buying isn't just "rent is throwing money away" — buying comes with its own costs: interest, taxes, maintenance, and the opportunity cost of tying up your down payment. This calculator projects the true net cost of each path over your chosen time horizon, factoring in home equity built and appreciation.
Step-by-Step Guide
- 1
Enter your current or comparable monthly rent for a similar home.
- 2
Enter the home purchase price you're considering.
- 3
Enter your down payment and expected mortgage interest rate.
- 4
Add annual property tax and an estimated maintenance % (1% of home value/year is a common rule of thumb).
- 5
Set an expected home appreciation rate for the area.
- 6
Enter the return you could earn if you invested your down payment elsewhere instead.
- 7
Choose how many years you plan to compare (and likely stay in the home).
Rent vs Buy Formula
Total Buy Cost = Mortgage Paid + Property Tax + Maintenance + Down Payment − Home Equity at End Net Advantage of Buying = Total Rent Cost − Total Buy Cost
Worked Example
Rent: $2,200/mo. Home price: $400,000. Down payment: $80,000. Rate: 6.5%. Tax: $4,800/yr. Maintenance: 1%/yr. Appreciation: 3%/yr. 5-year horizon. Over 5 years, renting costs roughly $132,000 total. Buying costs roughly $121,000 in mortgage interest + tax + maintenance, offset by home equity built (~$100,000+ from paydown and appreciation) — in most scenarios like this, buying nets out ahead after 5 years, but the breakeven point is sensitive to your appreciation and investment-return assumptions.
Understanding your result
Calculator results depend entirely on the information entered. For the most useful estimate, use current and accurate figures and include all costs that apply to your specific situation.
Frequently Asked Questions
How long do I need to stay in a home for buying to make sense?
A common rule of thumb is 4–7 years, since closing costs (typically 2–5% of the price on both buy and sell sides) need time to be offset by equity and appreciation. Shorter stays usually favor renting.
Should I include the opportunity cost of my down payment?
Yes — money in your down payment could otherwise be invested. This calculator shows that opportunity cost separately so you can see how sensitive the decision is to your assumed investment return.
Does this calculator include closing costs?
Not automatically — add estimated closing costs on both the purchase (2–5%) and eventual sale (6–10%) manually to your down payment and expected proceeds for a fully precise picture.
What's a safe home appreciation assumption?
Long-run US home appreciation has historically averaged around 3–4% annually, though it varies significantly by market and time period. Avoid using recent boom-year numbers as a baseline assumption.
Is renting really 'throwing money away'?
Not necessarily — rent buys you flexibility and predictable costs, and the money you'd have spent on a down payment, maintenance, and closing costs can be invested instead. The right answer depends on your time horizon, market, and financial goals.