"Should I rent or buy?" is one of the biggest financial decisions most people make, and most simple comparisons get it wrong in the same way: they treat a renter's down payment as if it just disappears. This calculator invests that money instead, which is what actually happens if you don't put it into a house — and that single choice is often what decides the answer.
How to Use This Rent vs. Buy Calculator
Enter the home price, down payment, mortgage rate and term, and expected appreciation under "Buying," along with property tax, insurance, maintenance, and closing costs. Under "Renting," enter your monthly rent and expected annual increase. Set how many years you plan to stay — this matters more than almost any other input — and the return you could earn if your cash were invested instead of spent on a larger down payment or higher housing costs.
Why This Comparison Invests the Renter's Cash
A fair comparison has to account for what the buyer's up-front cash would otherwise do. If someone chooses to rent, their would-be down payment and closing costs don't vanish — they can be invested. This calculator credits that growth to the renting side, and does the same each month for the difference whenever renting costs less than owning that month. Leaving this out is the most common way rent-vs-buy comparisons overstate how much buying "builds wealth."
What "Break-Even Year" Means
It's the first year at which the net cost of buying — after subtracting the equity you've built and accounting for selling costs — becomes lower than the net cost of renting — after subtracting the growth on your invested cash. Staying fewer years than that generally favors renting; staying longer generally favors buying, because the large up-front and back-end costs of a home purchase get spread over more years of ownership.
Example Calculation
A $400,000 home with a $80,000 down payment, 6.5% mortgage rate, and 3% appreciation, compared against $2,200 monthly rent rising 3% a year, with the renter's cash invested at 6%, might show renting ahead for the first several years while up-front buying costs are still being "paid off" through equity — then buying pulling ahead somewhere in the following decade, once enough years have passed to absorb those costs.
What Affects the Rent vs. Buy Decision
- How long you'll stay — the single biggest factor; buying's up-front costs need years to amortize away.
- Home appreciation — directly increases the equity side of the buying calculation.
- Return on invested cash — a higher assumed return on the renter's invested down payment shifts the comparison toward renting.
- Rent growth — faster-rising rent erodes renting's advantage over a long enough holding period.