Rent vs Buy Calculator
Compare the total cost of renting versus buying a home over time, including equity buildup, tax benefits, and opportunity cost.
Results
Visualization
How It Works
The rent vs buy decision depends on far more than comparing monthly payments. True costs include maintenance (about 1% of home value annually), property taxes, insurance, opportunity cost of your down payment, tax benefits of mortgage interest, and home appreciation. Generally, buying becomes more favorable the longer you stay in one place, with 5-7 years often cited as the break-even point.
The Formula
Total Buy Cost = Down payment + Mortgage payments + Taxes + Insurance + Maintenance - Equity built - Tax savings + Selling costs
Variables
- Down Payment — Cash paid upfront, which has an opportunity cost since it could be invested elsewhere (assumed 7% return)
- Appreciation — Annual home value increase, historically 3-4% nationally but varies greatly by market
- Maintenance — Annual upkeep costs, estimated at 1% of home value per year
- Selling Costs — Agent commissions and closing costs when you sell, typically 5-6% of sale price
Worked Example
Comparing a $350,000 home (10% down, 6.5% rate) vs $1,800/month rent over 7 years with 3.5% appreciation: total rent cost with 3% annual increases and $24,500 opportunity cost is about $182,000. Net buy cost after equity, tax savings, and selling costs is roughly $155,000, making buying about $27,000 cheaper over 7 years.
Practical Tips
- The break-even horizon is typically 5-7 years. If you plan to move sooner, renting is often cheaper due to closing and selling costs.
- Home appreciation is not guaranteed. Markets can decline, and your local market may differ significantly from national averages.
- Factor in the hidden costs of ownership: maintenance, HOA fees, special assessments, and major repairs like roof replacement.
- Renting provides flexibility and liquidity that buying does not. The financial advantage of buying assumes you stay put.
- Do not stretch your budget to buy. The ideal monthly housing cost (mortgage + taxes + insurance) should not exceed 28% of gross income.
Frequently Asked Questions
Is it always better to buy than rent?
No. Renting can be financially better in expensive markets with low rent-to-price ratios, if you plan to move within 3-5 years, or if you can invest the difference between rent and ownership costs at higher returns. The math depends heavily on local home prices, rent levels, appreciation rates, and your time horizon.
What is the opportunity cost of a down payment?
The down payment money could be invested instead. If you put $35,000 down on a home instead of investing it in an index fund averaging 7% annual returns, you give up about $18,000 in investment gains over 7 years. This opportunity cost should be factored into the buy side of the comparison.
How does the tax benefit of buying work?
Mortgage interest is tax deductible if you itemize deductions, up to $750,000 of mortgage debt. However, with the higher standard deduction ($14,600 single / $29,200 married in 2025), many homeowners no longer itemize and therefore get no mortgage interest tax benefit.
What maintenance costs should I expect as a homeowner?
Budget 1% of the home value annually for routine maintenance. A $350,000 home costs about $3,500/year in maintenance. Older homes may require 2-3%, and major items like roof replacement ($8,000-$15,000), HVAC ($5,000-$10,000), and foundation work can add significant unplanned costs.
Does this calculator account for inflation?
Yes. Rent is assumed to increase 3% annually (roughly matching historical rent inflation), and home appreciation is a separate adjustable input. The opportunity cost calculation assumes 7% nominal investment returns. All figures are in nominal (not inflation-adjusted) dollars.
Sources
- NY Times Rent vs Buy Calculator Methodology
- Federal Reserve: Survey of Consumer Finances
- FHFA: House Price Index