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Should you keep renting or buy a home? Our free rent vs buy calculator compares total renting costs against buying costs and the equity you’d build — so you can see which path leaves you wealthier.
Enter home price, down payment, mortgage terms, current rent, rent growth, home appreciation, property tax, insurance, maintenance and how long you’ll stay. The calculator totals rent paid over the horizon and compares it with buying outlay (down payment + monthly costs) minus the equity you’d own.
Formula: Net advantage = (Home value − Remaining loan balance) − Total buying outlay + Total rent paid. Positive favors buying.
This calculator answers one of life’s biggest money questions: should you keep renting or buy a home? It compares what renting will cost you over your time horizon against the full cost of buying minus the equity you build. Follow these steps for a fair comparison.
Pro tip: The stay length drives the answer more than any other input. Run your numbers at 3, 5, 7, and 10 years. Most renters are shocked to see renting win decisively at 3 years and buying win decisively at 10 — the crossover point, usually around year 5 to 7, is the number to remember.
The rent-versus-buy decision is really a comparison between two kinds of spending: unrecoverable costs. When you rent, 100 percent of your rent is unrecoverable — it is gone forever. When you buy, only part of your monthly outlay is unrecoverable: the interest portion of your mortgage payment, property taxes, insurance, and maintenance. The principal portion of your mortgage payment is not spending at all; it is a forced transfer into your own home equity, which you recover when you sell.
This is why comparing a $2,023 mortgage payment to $2,200 in rent and declaring buying cheaper is dangerously incomplete. On a $320,000 loan at 6.5 percent, the first month’s $2,023 payment contains about $1,733 of interest and only $290 of principal. Early on, most of your payment is unrecoverable, just like rent. The advantage of buying builds over time as amortization shifts each payment toward principal and as appreciation grows the asset.
Buying also brings leverage, the double-edged sword of real estate. With 20 percent down on a $400,000 home, you control a $400,000 asset with $80,000. A 4 percent rise in home value ($16,000 in year one) is a 20 percent return on your down payment — before counting principal paydown. But leverage cuts both ways: a 10 percent price decline wipes out half your equity.
Do not forget the opportunity cost of the down payment. That $80,000 could have earned investment returns in the stock market instead of sitting in home equity. A thorough rent-vs-buy analysis accounts for this, which is one reason short stays favor renting: the market returns on your down payment compound while buying’s upfront closing costs (2 to 5 percent of the price) are still being amortized.
Finally, the price-to-rent ratio gives a quick market read: divide the home price by annual rent. At $400,000 and $26,400 annual rent, the ratio is 15.2. Ratios below 15 generally favor buying, 15 to 20 are a toss-up, and above 20 favor renting. But rules of thumb never replace running your own numbers with your own horizon, which is exactly what the calculator above does.
The 5% rule is the fastest honest shortcut in the rent-vs-buy debate. It says the unrecoverable cost of owning a home runs about 5 percent of the home’s value per year, broken down as:
Compare that 5 percent figure to the home’s rent yield — annual rent divided by home price. If annual rent is less than 5 percent of the price, renting is cheaper. If it is more, buying is cheaper. The principal portion of your mortgage payment does not count as a cost because you get it back as equity.
Five percent of $400,000 is $20,000 per year, or $1,667 per month of unrecoverable ownership cost. Annual rent is $2,200 × 12 = $26,400, which exceeds $20,000. The 5% rule says buying wins — and the full calculator agrees, showing buying ahead by $118,030 over 7 years. Notice the rule ignores the $2,023 mortgage payment entirely and focuses only on the roughly $1,667 per month that ownership truly consumes.
Five percent of $500,000 is $25,000 per year. Annual rent is $1,800 × 12 = $21,600, which is less than $25,000. The 5% rule says renting wins here — you would pay $21,600 a year for housing that would consume $25,000 a year to own, and you keep your down payment invested. This is the classic high-price coastal market situation where disciplined renters who invest the difference can come out ahead.
The 5% rule is a screening tool, not a verdict. It ignores your time horizon, tax deductions, expected appreciation, and rent growth — all of which the calculator above models explicitly. Use the rule to sanity-check the calculator’s verdict: if they disagree sharply, double-check your inputs.
Priya pays $2,200 a month in rent and is considering a $400,000 home with 20 percent down ($80,000) at 6.5 percent for 30 years. She expects to stay 7 years. Her mortgage payment is $2,022.57 per month. Let us walk through the full 7-year math the way the calculator does.
Renting side: Her rent grows 3 percent per year: $26,400 in year one, $27,192 in year two, $28,008 in year three, $28,848 in year four, $29,713 in year five, $30,605 in year six, and $31,523 in year seven. Total rent paid over 7 years: $202,289. She keeps her $80,000 invested, but for a clean comparison we count only direct housing costs.
Buying side: Over 84 months she makes $169,896 in mortgage payments. Add the $80,000 down payment, $30,800 in property tax (1.1 percent of $400,000 × 7 years), $12,600 in insurance ($150 × 84), and $28,000 in maintenance (1 percent × 7 years). Total buying outlay: $321,300.
The asset side: At 4 percent annual appreciation, the home is worth $400,000 × 1.047 = $526,373 after 7 years. Her remaining mortgage balance is about $289,332, so her equity is $526,373 − $289,332 = $237,041.
Verdict: Net buying cost = $321,300 − $237,041 = $84,259, versus $202,289 to rent. Buying wins by $118,030. The equity — built from $80,000 down plus $30,668 of principal paydown plus $126,373 of appreciation — overwhelms the higher gross outlay. This is the standard story: over a medium-to-long stay, ownership converts payments into equity while renting converts them into nothing.
Now keep every input identical — $400,000 home, $80,000 down, 6.5 percent, $2,200 rent, 7 years — and change only the appreciation rate. This isolates how much the verdict depends on the housing market rather than on Priya’s choices.
At 2 percent appreciation: The home grows to $400,000 × 1.027 = $459,474. Equity = $459,474 − $289,332 = $170,142. Net buying cost = $321,300 − $170,142 = $151,158 versus $202,289 renting. Buying still wins, but only by $51,131 — less than half the base-case advantage. In a sluggish market, ownership’s edge shrinks dramatically.
At 6 percent appreciation: The home grows to $400,000 × 1.067 = $601,452. Equity = $601,452 − $289,332 = $312,120. Net buying cost = $321,300 − $312,120 = just $9,180 versus $202,289 renting. Buying wins by $193,109. Leverage does the heavy lifting: that extra 2 percent of annual appreciation on a $400,000 asset is $8,000+ per year flowing to an $80,000 down payment.
The lesson is humility about forecasts. Nobody knows whether their market will deliver 2, 4, or 6 percent. Run the calculator at all three and ask whether buying still wins in the pessimistic case. If it does — as it does here, by $51,131 — the decision is robust. If the verdict flips, you are speculating on appreciation, and you should size that risk honestly before buying.
1. Comparing the mortgage payment to rent. A $2,023 payment versus $2,200 rent looks like a $177 win for buying, but roughly $1,733 of that payment is interest in year one — unrecoverable, just like rent. The honest comparison is unrecoverable costs versus rent, which is exactly what the 5% rule approximates and the calculator computes.
2. Forgetting selling costs. Selling typically costs 5 to 6 percent of the price in agent commissions plus closing costs — $24,000 to $30,000 on a $400,000 home. Short stays get crushed by this: sell after 3 years and commissions alone can erase all your equity gains. The calculator’s horizon math captures this through the equity-versus-outlay comparison.
3. Underestimating maintenance. The 1 percent rule ($4,000 a year on a $400,000 home) is an average, not a ceiling. A new roof ($12,000), HVAC replacement ($8,000), or foundation issue can blow through years of budgets at once. Older homes deserve 1.5 to 2 percent. Renters never face these bills; buyers always eventually do.
4. Ignoring the down payment’s opportunity cost. That $80,000 down payment could earn roughly 7 percent annually in a stock index fund — about $5,600 a year initially, compounding. Over 7 years at 7 percent it would grow to roughly $128,500. Buying must beat renting by enough to justify tying up that capital, which is why the calculator’s verdict matters more than any monthly-payment comparison.
5. Assuming you will stay long enough. Life happens: job changes, relationships, growing families. The average homeowner stays about 13 years, but the median first-time buyer moves much sooner. If there is a real chance you move within 4 years, run the calculator at 3 years and take the renting verdict seriously — buying’s upfront costs need time to amortize.
Once you have decided, model the financing precisely. Our Loan Calculator breaks any mortgage into monthly payments and total interest, our House Affordability Calculator tells you what price range your income supports, and our Auto Loan Calculator keeps car payments from crowding out your housing budget. Browse the full Financial Calculators collection for more.
This page provides a rent vs buy calculator comparing total renting cost against buying cost minus equity built over a user-defined horizon. Inputs: home price, down payment percent, mortgage rate, loan term, current monthly rent, annual rent increase, home appreciation rate, stay length, property tax rate, insurance, maintenance rate. Outputs: verdict (which wins and by how much), total rent paid, total buying outlay, home value after horizon, home equity built. Core formula: net advantage = (home value − remaining loan balance) − total buying outlay + total rent paid. Default example: $400,000 home, 20% down, 6.5% 30-year, $2,200 rent at 3% growth, 4% appreciation, 7-year stay → buying beats renting by $118,030 ($202,289 rent vs $321,300 outlay vs $526,373 home value vs $237,041 equity). The article explains the 5% rule (1% tax + 1% maintenance + 3% cost of capital vs annual rent), two worked rule examples, a 7-year worked comparison, an appreciation sensitivity analysis (2% vs 6%), five common mistakes, and related calculators.
It depends on horizon, prices and rates. Example: a $400,000 home vs $2,200 rent over 7 years — buying comes out about $118,000 ahead once equity is counted. Test your market in the rent vs buy calculator.
Compare 5% of the home’s value per year (1% tax + 1% maintenance + 3% cost of capital) against annual rent. If rent is well below 5% of price, renting often wins short-term.
Usually 5–7+ years, because buying has high upfront costs that need time for appreciation and principal paydown to overcome.
Property tax, homeowner’s insurance, maintenance (~1%/yr), HOA fees, and selling costs (5–6% agent commissions) — our calculator includes the first three.
Hugely — it’s leveraged. 4% appreciation on a $400,000 home with 20% down is a 20% return on your $80,000 down payment in year one, before costs.
The 5% rule compares 5% of a home’s value per year — 1% property tax, 1% maintenance, and 3% cost of capital — against annual rent. If yearly rent is less than 5% of the home’s price, renting is cheaper; if more, buying wins. For a $400,000 home, 5% is $20,000 per year ($1,667/month). At $2,200 monthly rent ($26,400/year), buying wins. At $1,400 monthly rent ($16,800/year), renting wins. It is a screening shortcut; the calculator above gives the full horizon-based verdict.
Usually 5 to 7 years or more. Buying carries heavy upfront costs — 2 to 5% in closing costs plus 5 to 6% in agent commissions when you sell — that must be spread over many years. In the default example ($400,000 home, $2,200 rent, 4% appreciation), buying pulls ahead by $118,030 over 7 years, but at 3 years renting would still win because the roughly $50,000 in transaction costs overwhelm the equity built. Run the calculator at several horizons to find your personal crossover point.
Hugely, because of leverage. With 20% down on a $400,000 home, a 4% price gain ($16,000) is a 20% return on your $80,000 down payment. Over 7 years, 2% annual appreciation leaves buying ahead by only $51,131 in the example, while 6% appreciation pushes the advantage to $193,109. If buying only wins under optimistic appreciation, you are speculating — make sure the decision still works at 2 to 3% appreciation before committing.
Sources: figures calculated with the standard amortization and net-advantage formulas above and cross-checked in the calculator; for official housing guidance, see the Consumer Financial Protection Bureau at consumerfinance.gov and HUD at hud.gov.
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