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Rent vs Buy Calculator

Compare the true total cost of renting versus buying a home over any time period. Factor in mortgage payments, property taxes, maintenance, home appreciation, and equity to make a confident housing decision.

Last Updated: May 2026
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Renting

Buying

= $80,000

Analysis Period:

Total Cost of Renting

Total Rent Paid$275,133over 10 years

Total Cost of Buying

Gross Buy Cost$418,739mortgage + tax + maintenance + down

Net Cost of Buying

After Equity$177,924− $240,814 equity
Buying Saves More

Over 10 years, buying saves you approximately $97,209 compared to renting.

Home projected value: $592,098 · Equity gained: $240,814

Year-by-Year Cost Comparison

YearRent (Annual)Buy (Annual)Cumul. RentCumul. Buy (Gross)
Year 1$24,000$33,071$24,000$33,071
Year 2$24,720$33,231$48,720$66,303
Year 3$25,462$33,398$74,182$99,701
Year 4$26,225$33,571$100,407$133,272
Year 5$27,012$33,751$127,419$167,022
Year 6$27,823$33,938$155,242$200,960
Year 7$28,657$34,133$183,899$235,093
Year 8$29,517$34,335$213,416$269,428
Year 9$30,402$34,546$243,819$303,974
Year 10$31,315$34,765$275,133$338,739

* Buy cost includes mortgage payments, property tax, and maintenance. Does not subtract equity. Down payment included in totals above.

Renting vs. Buying: The True Cost of Homeownership

The rent vs. buy decision is one of the biggest financial choices most people make. Unfortunately, it's often oversimplified with advice like "renting is throwing money away" or "buying is always the smarter investment." The reality is far more nuanced and depends heavily on your local market, how long you plan to stay, and what you'd do with the money you didn't use for a down payment.

The Total Cost of Ownership Framework

When evaluating buying, most people only think about the mortgage. But the total cost of homeownership includes:

  • Mortgage payments (principal + interest)
  • Property taxes (typically 1–2% of home value annually)
  • Maintenance & repairs (historically ~1% of home value per year)
  • Down payment opportunity cost (capital that could have been invested)
  • Transaction costs (closing costs, agent fees — not modeled here)

Subtract the equity you build over time and you get the net cost of buying — the number that should be compared against cumulative rent payments.

The 5% Rule: A Quick Benchmark

A useful rule of thumb: multiply the home price by 5% and divide by 12. If comparable monthly rent is below this figure, renting is likely more cost-effective. For a $500,000 home, that threshold is approximately $2,083/month. The 5% covers roughly 1% in property tax, 1% in maintenance, and 3% in cost of capital (either mortgage interest or investment opportunity cost).

When Buying Beats Renting

Buying tends to come out ahead when you stay in the home for 7 or more years, when home appreciation is strong, when you lock in a low mortgage rate, and when your local price-to-rent ratio is below 20. Use the year-by-year table in the calculator to find your personal "crossover year" — the point at which buying becomes cheaper than renting on a cumulative basis.

Frequently Asked Questions

Is it always better to buy than to rent?

Not at all — it depends on your local market, how long you plan to stay, your down payment, and opportunity cost. Buying makes more financial sense when you plan to stay 5+ years and when the price-to-rent ratio in your market is favorable. In high-cost cities with low appreciation, renting can be the smarter choice.

What is home equity and how does it affect the calculation?

Home equity is the portion of your home's value that you actually own — the current market value minus your remaining mortgage balance. As you pay down your loan and as your home appreciates, equity grows. Our calculator subtracts this equity from your total buying cost to give you the 'net cost' of buying, which is the fairest comparison to renting.

What is the 5% rule for renting vs buying?

The 5% rule, popularized by financial planner Ben Felix, says multiply the home price by 5% and divide by 12 to get a monthly threshold. If your monthly rent is below that amount, renting is typically the better financial decision. The 5% accounts for property taxes (1%), maintenance (1%), and the cost of capital (3%). Our calculator performs a more detailed version of this analysis.

Why does the down payment matter so much?

The down payment is money you tie up in an illiquid asset. That capital could otherwise be invested and compounding. Our calculator adds the down payment to the total cost of buying because it represents a real financial commitment — even if you get it back as equity. A larger down payment reduces monthly mortgage payments but increases your upfront capital commitment.

When does buying clearly win over renting?

Buying tends to win when: (1) you stay in the home for 7+ years, allowing equity to accumulate and transaction costs to amortize; (2) home appreciation outpaces the stock market; (3) you lock in a low fixed mortgage rate; and (4) local rent prices are high relative to purchase prices. Run the calculator across different time horizons to find your personal crossover point.

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