Rent vs Buy Calculator
Should I rent or buy a home?
Analyze the 5-year financial impact of buying versus renting in this market.
Use This Calculator in Minutes
Compare the total financial impact of renting versus buying over time to make the right housing decision.
Common scenarios
- Deciding between signing a lease or buying a condo
- Evaluating how long you need to stay to break even
- Comparing investment returns: Home equity vs Stock market
You will get
- Clear "Rent" or "Buy" financial verdict
- 5-year net cost projection chart
- Breakeven timeline analysis
Quick Result
Financial Verdict
Buying is Cheaper
Save $26,431 over 7 years
Based on
- • Home Price: $400,000
- • Monthly Rent: $2,500
- • Duration: 7 Years
- • Interest Rate: 6.5%
Market Inputs
Buying is Cheaper
You save $26,431 over 7 years by buying.
Breakeven Year: Year 5
Net Cost Projection (Lower is Better)
Shows cumulative net cost. Buying starts higher (closing costs) but usually flattens as equity builds. Renting grows steadily.
Disclaimer: This tool provides estimates based on historical data, user inputs, and general assumptions. Travel costs, living expenses, and tax rates are subject to frequent change. Actual costs may vary significantly based on season, booking time, lifestyle choices, and economic conditions. Information provided here should not be considered as financial or travel advice. Please verify prices and requirements with official sources before making significant decisions.
Methodology and Trust
Formulas
Monthly Mortgage
M = P[r(1+r)^n]/[(1+r)^n – 1]
Total Buy Cost
BuyCost = Mortgage + Taxes + Maint + ClosingCosts - (HomeValue - Loan - SellingFees)
Total Rent Cost
RentCost = RentPaid - InvestmentGains(DownPaymentDiff)
Net Savings
Savings = |BuyCost - RentCost|
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The Equity Illusion: Renting is NOT 'Throwing Money Away'
Key Insights & Concepts
The "American Dream" says you are wasting money if you rent. The math says otherwise. Renting is purchasing mobility and freedom from liability. Buying is a leveraged investment that comes with a "phantom mortgage" of unrecoverable costs.
1. The "Unrecoverable Costs" Framework
To make a fair comparison, you must compare the unrecoverable costs of both options.
- Rent: 100% unrecoverable. You pay for shelter; you get shelter.
- Buy: Mortgage Interest + Property Tax + Maintenance + HOA + Insurance + Closing Costs. These are also 100% unrecoverable. You never get this money back.
The Paradox: In expensive markets (like San Francisco or Toronto), the unrecoverable costs of buying often exceeding the total cost of renting a similar unit.
2. The "Opportunity Cost" of the Down Payment
This is the silent killer of home returns.
If you put $100k into a house, that $100k is "trapped." It grows at the rate of real estate (historically 3-4%).
If you rent and put that $100k into the S&P 500, it grows at ~7-10% (historically). Over 30 years, this difference in compounding can be worth millions.
3. The 5% Rule
A quick rule of thumb to spot a bad deal:
Multiply the Home Price by 5% (Interest/Tax/Maint). Divide by 12.
Example: $500,000 Home * 0.05 = $25,000 / 12 = $2,083.
If you can rent a similar home for less than $2,083/mo, renting is mathematically cheaper than buying.
4. Maintenance: The 1% Reality
Renters call the landlord when the water heater breaks. Owners write a check for $2,000.
You must budget 1% of the home's value annually for repairs. For a $500k house, that is $5,000/year or $416/month. If you don't budget for this, you aren't investing; you are depreciating.