How to use this calculator
This rent vs buy calculator compares your net worth year by year if you buy a home or keep renting. Start with the home you're considering and the rent for a similar place.
- Years you expect to stay: the biggest single factor. Be honest about it.
- Home price, down payment %, rate and term: the basics of the mortgage.
- Rent and yearly rent increase: what a comparable home rents for, and how fast rents rise locally.
- Home appreciation: how much you expect the home's value to grow each year.
- Investment return: what your savings would earn if you didn't buy.
- Property tax, maintenance, insurance and HOA: the ongoing costs of owning.
- Buying costs (3%) and selling costs (6%): closing costs now, and agent and closing fees when you sell.
The results show the break-even year, each side's net worth at your chosen horizon, and a chart over time. Every assumption is an input you can change. We'd rather you see them than trust a black box.
How we calculate rent vs buy
Both households start with the same cash and spend the same total each month. The question is who ends up with more.
Buyer pays up front: down payment + buying costs
Renter invests that same amount instead
Each month:
Owning cost = P&I + property tax + insurance + HOA + maintenance + PMI
Renting cost = rent + renter's insurance
Whoever spends less invests the difference at the investment return
Each year:
Buyer net worth = home value × (1 − selling costs) − loan balance
+ buyer's invested savings
Renter net worth = renter's investment account
Home value grows with appreciation. Rent rises with your rent increase. Property tax and maintenance are based on the current home value. Insurance and HOA grow with inflation (3% by default).
Worked example: the default inputs. A $400,000 home with 20% down at 7.32% for 30 years, versus $2,300 a month in rent. We assume 3.5% yearly appreciation and 3.5% rent increases, with a 6% investment return. Owning costs include 0.9% property tax, 1% maintenance and $2,400 a year insurance.
- Up front: the buyer spends $92,000 ($80,000 down plus $12,000 closing costs). The renter invests $92,000.
- First year, per month: owning costs about $3,032. Renting costs about $2,315 including renter's insurance. The renter invests the roughly $717 difference.
| Year | Buyer net worth | Renter net worth | Ahead |
|---|---|---|---|
| 1 | $72,200 | $106,400 | Renter by $34,100 |
| 5 | $144,300 | $165,800 | Renter by $21,400 |
| 7 | $185,300 | $196,500 | Renter by $11,200 |
| 9 | $229,900 | $227,700 | Buyer by $2,300 |
| 15 | $395,400 | $327,500 | Buyer by $67,900 |
Buying breaks even in year 9. The buyer starts far behind because closing costs and the 6% selling cost are lost right away. After that, rising rents and home equity slowly close the gap.
Rent vs buy break-even years
Break-even years are very sensitive to a few inputs. Change one assumption from the example and see how far it moves:
| Change | Break-even |
|---|---|
| Default inputs | Year 9 |
| Mortgage rate 6% instead of 7.32% | Year 5 |
| Appreciation 2% instead of 3.5% | Not within 15 years |
| Investment return 8% instead of 6% | Not within 15 years |
This is why one national rule of thumb can't settle the question. Small changes to appreciation or returns, compounded over a decade, swing the result by tens of thousands of dollars. Try a cautious case and a hopeful case for your area, and see if the answer holds in both.
The 5% rule
The 5% rule is a quick way to compare rent with the costs of owning that you never get back. It estimates those costs at about 5% of the home's value per year:
- About 1% property tax, though rates vary widely by state.
- About 1% maintenance, for repairs, replacements and upkeep.
- About 3% cost of capital, which combines mortgage interest with the return your down payment could earn elsewhere.
Multiply the home price by 5% and divide by 12. If you can rent a similar home for less than that, renting may be the cheaper choice. For a $400,000 home, that's $20,000 a year, or about $1,667 a month.
In the example, rent of $2,300 a month is 6.9% of the price per year. That's above the 5% line, which suggests buying, but only if you stay long enough. The full model adds what the 5% rule leaves out: buying and selling costs, rent increases and appreciation. The calculator shows the 5% figure for your inputs so you can compare it with your rent.
Is renting throwing money away?
Renting isn't wasted money. You're paying for housing. Owners pay for housing too, through interest, taxes, insurance and maintenance. The principal part of a mortgage payment builds wealth, but the rest doesn't.
Meanwhile, a renter who invests the difference also builds wealth. In the example, the renter's account starts at $92,000 and grows every month. Buying wins only when home equity outgrows that account. Our compound interest calculator shows how invested savings grow over time.
Renting also has value that doesn't show up in a spreadsheet: flexibility to move, no surprise repair bills, and no concentration of your wealth in one house. Owning has its own: stable payments, control over your home, and protection from rent increases.
Price-to-rent ratio
The price-to-rent ratio divides the home price by a year of rent. In the example, $400,000 ÷ ($2,300 × 12) ≈ 14.5. Lower ratios mean rent is high compared with prices, which tends to favor buying. Higher ratios tend to favor renting.
The ratio is a fast screen, not a verdict. It ignores your mortgage rate, taxes and how long you'll stay.
Assumptions to know
We want you to see exactly what drives the result:
- The renter actually invests. If you'd spend the difference instead, buying looks better than shown.
- Returns are steady. Real markets go up and down. Both home values and investments can fall.
- No taxes on gains. We don't model capital gains tax on investments or the home sale exclusion.
- No mortgage interest deduction. Most households take the standard deduction.
- Selling costs apply at the end. The buyer's net worth assumes you sell that year.
If buying looks right, check what fits your income with the how much house can I afford calculator, then see the full payment in the mortgage calculator.
Frequently asked questions
Should I rent or buy a house?
It depends mostly on how long you'll stay, local prices and rents, and what your savings would earn otherwise. With this calculator's default numbers, buying a $400,000 home pulls ahead of renting for $2,300 a month in year 9. If you might move within a few years, renting often comes out ahead because buying and selling costs are high.
Is renting throwing money away?
No. Rent buys you a place to live, the same way a mortgage does. Owners also have costs they never get back: interest, property taxes, insurance, maintenance and closing costs. The fair comparison is rent against those unrecoverable costs, not against the whole mortgage payment.
What is the 5% rule for renting vs buying?
The 5% rule estimates an owner's yearly unrecoverable costs at about 5% of the home's value. That's roughly 1% property tax, 1% maintenance and 3% cost of capital. Divide 5% of the price by 12. If rent is below that, renting may be cheaper. For a $400,000 home, the cutoff is about $1,667 a month.
What is a good price-to-rent ratio?
Price-to-rent ratio is the home price divided by a year of rent for a similar place. Lower ratios tend to favor buying, and higher ratios tend to favor renting. A $400,000 home that rents for $2,300 a month has a ratio of about 14.5. There's no official cutoff, so use the ratio as a quick check and the year-by-year comparison for the real answer.
How many years do I need to stay for buying to make sense?
That's the break-even year this calculator shows. It's often somewhere around 5 to 10 years, but it can be shorter or never, depending on your inputs. Raising home appreciation or lowering your mortgage rate brings it closer. A higher investment return or a lower rent pushes it out.
Does this include the mortgage interest tax deduction?
No. Most households take the standard deduction ($32,200 for married couples filing jointly in 2026), so the mortgage interest deduction gives many owners little or no benefit. If you itemize, buying may look slightly better than shown here.
Why does the renter invest the down payment?
To compare fairly, both households start with the same cash. The buyer spends it on a down payment and closing costs. The renter keeps it invested. Each month, whoever spends less invests the difference. That way the result reflects the choice, not who had more money.
Sources
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Written and reviewed by SenseCalc Editorial Team
Calculator builders and personal finance writers
We build and test every SenseCalc calculator against official formulas and sources (IRS, CFPB, Federal Reserve, Freddie Mac), then explain the results in plain English.
Last reviewed October 26, 2026. How we build and check our calculators