Rent vs Buy Calculator

How this rent vs buy comparison works

Buying builds equity through principal paydown and home-price changes, but you pay interest, taxes, insurance, and maintenance. Renting avoids those ownership costs; the model assumes you invest the down payment (and any monthly cash-flow difference favoring rent) at your chosen investment return.

After the selected number of years, “buying net worth” is estimated home value minus remaining mortgage balance. “Renting net worth” is the modeled investment portfolio. The difference shows which path is ahead under your assumptions—not which lifestyle is better.

Example

On a $400,000 home with 20% down, 7% mortgage rate, 3% appreciation, and $2,000 rent rising 3% per year, a 10-year comparison with 7% investment returns may favor buying or renting depending on how costly ownership is each month. Change appreciation or returns by a point or two and the winner often flips—so treat the verdict as a sensitivity tool.

Assumptions to stress-test

• Lower appreciation and higher maintenance if you expect an older home or softer market
• Higher rent growth in tight rental markets
• Lower investment returns if you would keep cash in conservative accounts
• Shorter horizons (3–5 years) where buying transaction costs matter more

Limitations

• Does not subtract buyer/seller closing costs or capital gains taxes on sale
• Does not include PMI, HOA, renovations, or vacancy if you later rent the property out
• Investment returns are hypothetical and not guaranteed
• Ignores non-financial factors: stability, schools, commute, and flexibility to move

Frequently asked questions

Why does buying sometimes lose in the first years?

Early mortgage payments are interest-heavy, and transaction costs (not fully modeled here) are front-loaded. Ownership often looks better after you stay long enough for equity and appreciation to compound.

What investment return should I use?

Use a long-run expected return for the mix you would actually buy (for example, a diversified stock/bond portfolio), not last year’s peak. Being slightly conservative avoids over-optimism for the renting path.

Does this tell me whether I can qualify for a mortgage?

No. Check budget fit with the affordability calculator and payment details with the mortgage calculator.

Should lifestyle factors override the numbers?

Often yes. A move in two years, career uncertainty, or a need for flexibility can make renting rational even when the model prefers buying.