BuildCalc Pro

Rent vs Buy Calculator

Compare the true long-term cost of renting versus buying a home. Factor in mortgage rates, appreciation, taxes, maintenance, and opportunity cost.

Renting

Buying

How to Use This Calculator

1. Enter your current monthly rent and expected annual rent increase. 2. Enter the home purchase price, down payment, and mortgage details. 3. Set property tax rate, insurance, and maintenance costs. 4. Choose how many years to compare and your expected investment return. 5. Click Calculate to see which option costs less over time.

Key Formulas

Monthly Mortgage Payment

P × [r(1+r)^n] / [(1+r)^n – 1]

P = principal, r = monthly interest rate, n = total number of payments.

Breakeven Rent

Home Value × 5% ÷ 12

Quick estimate of the monthly rent below which renting is cheaper than buying.

Opportunity Cost

Down Payment × (1 + return)^years – Down Payment

The growth your down payment would have achieved if invested instead.

Rent vs Buy: The Complete Financial Comparison

The rent vs buy decision is one of the biggest financial choices most people face. While homeownership has long been considered part of the American Dream, the math does not always favor buying — especially in high-cost markets or when you plan to move within a few years.

The key factors in the rent vs buy equation include mortgage payments (principal + interest), property taxes (typically 0.5–2.5% of home value annually), homeowners insurance ($1,200–$3,000/year), maintenance costs (budget 1–2% of home value per year), and opportunity cost of your down payment.

On the renting side, you pay monthly rent (which increases 3–5% annually in most markets), renters insurance ($150–$300/year), but you avoid maintenance costs and keep your down payment invested. At a 7% average stock market return, a $70,000 down payment grows to over $137,000 in 10 years.

The breakeven horizon — the number of years at which buying becomes cheaper than renting — typically falls between 3 and 7 years. If you plan to stay fewer years than the breakeven point, renting is usually the better financial move.

Home appreciation averages 3–4% nationally but varies dramatically by market. Closing costs (2–5% when buying, 6–10% when selling) eat into your equity, which is why short holds rarely favor buying.

Frequently Asked Questions

How long do I need to stay for buying to make sense?

In most markets, you need to stay at least 5–7 years for buying to beat renting financially. This accounts for closing costs, selling costs, and the slow equity buildup in early mortgage years when most of your payment goes to interest.

Is renting really throwing money away?

No. Renting provides housing, flexibility, and frees up capital for other investments. In the early years of a mortgage, 60–80% of your payment goes to interest — which is also money you do not get back. The real question is whether your total cost of ownership is less than rent over your expected stay.

What is the 5% rule for rent vs buy?

The 5% rule says: multiply the home value by 5%, divide by 12 to get a monthly breakeven rent. If your rent is below this number, renting is likely cheaper. For a $400,000 home, thats $1,667/month. If you can rent a comparable place for less, renting wins financially.

Should I buy a house if I can only put 5% down?

A smaller down payment means PMI ($100–$300/month), a larger loan, and more interest over time. With only 5% down on a $350,000 home, you will pay roughly $40,000–$60,000 more in total costs over 30 years compared to 20% down. It can still make sense in rapidly appreciating markets.