Rent vs Buy Calculator

How to use the calculator

1. Keep Rent vs buy selected.
2. Enter the home price, your down payment, the mortgage rate and the loan term.
3. Enter the monthly rent for a comparable home and how many years you expect to stay.
4. Open Advanced assumptions to set rent increases, home price growth, the return on invested savings, property tax, maintenance, insurance, and buying and selling costs.
5. Read the net worth difference, the verdict and the break-even year. The table shows both net worths for every year.

Switch to Rent-to-own to enter a purchase price, upfront fee, monthly payment, the share credited toward the price and the lease term.

How the comparison works

Buyer. Each month the owner pays principal and interest plus property tax and maintenance (as a percentage of the current home value) and insurance. At the end, net worth = home value − selling costs − remaining loan balance + any savings invested along the way.

Renter. The renter invests the down payment plus the buying costs on day one. Each month, whoever has the lower housing cost invests the difference: while owning costs more than rent, the renter invests the gap; once rent overtakes owning costs, the buyer does.

Assumptions. Rent rises once a year by the rate you set. Home prices and investments grow at constant monthly rates. Taxes are not modeled: no mortgage interest deduction, no tax on investment gains, no capital gains tax on the house. For reference, the IRS lets you exclude up to $250,000 of gain on a main home ($500,000 on a joint return) if you owned and lived in it for at least 2 of the 5 years before the sale.

Rent-to-own mode

The calculator adds up the rent credits, subtracts them and the upfront payment from the price, and shows what is still due at the end. It then finds the annual rate at which a loan for the price minus the upfront payment, repaid by the monthly payments and the final balance, would cost the same. Compare that rate with a mortgage APR.

Examples

$400,000 home, $80,000 down, 10 years

With a 6.5% 30-year mortgage and the default assumptions (3% rent growth, 3% appreciation, 6% investment return, 1% property tax, 1% maintenance, $1,500 insurance, 3% buying and 6% selling costs), owning costs $2,814 in the first month versus $2,200 rent. After 10 years the buyer's net worth is $234,029 and the renter's $233,769: buying is ahead by just $260, and year 10 is the break-even year.

Changing one input at a time

• Stay 5 years: renting ahead by $23,934.
• Stay 20 years: buying ahead by $109,583.
• Rent $1,800: renting ahead by $73,195.
• Rent $2,800: buying ahead by $110,443, break-even in year 4.
• Home prices grow 1% a year: renting ahead by $78,927.
• Investments earn 8%: renting ahead by $42,485.
• Mortgage rate 5.5%: buying ahead by $40,832, break-even in year 6.

Rent-to-own: $300,000 home, 3-year lease

A $5,000 upfront fee, $2,100 a month and 25% of each payment credited: credits total $18,900, $276,100 is still due at the end, you pay $356,700 in all, $56,700 above the price. The effective cost is 6.81% a year. With no rent credit it rises to 8.88%.

Reading the result

Small differences, like $260 in the first example, mean the decision rests on your assumptions and on non-financial factors. Time is the strongest lever: buying and selling costs need years to be recovered. Run a pessimistic and an optimistic case before deciding.