Rent vs. Buy Calculator
Compare the true long-term financial outcome of renting vs. buying, including opportunity cost.
Buying
Renting
Return if savings were invested instead
Renting comes out ahead by
$87,174
after 7 years, including investment opportunity cost
If You Buy
If You Rent & Invest the Difference
What is it?
This calculator compares the true long-term financial outcome of buying a home versus renting and investing the money you'd otherwise spend on a down payment and higher monthly costs — not just comparing a mortgage payment to rent.
Formula
Buyer's Net Worth = Home Value at Sale − Selling Costs − Remaining Loan Balance
Renter's Net Worth = Down Payment + Monthly Cost Differences, invested and compounded
Formula Explanation
Simply comparing a monthly mortgage payment to rent misses the bigger picture: buying requires a large upfront down payment and extra monthly costs (property tax, insurance, maintenance) that a renter doesn't pay. This calculator assumes a renter invests that upfront amount, plus the monthly difference whenever buying costs more than renting, and grows it at your expected investment return — then compares that invested net worth to the buyer's home equity at the end of the period.
Example Calculation
Buying a $400,000 home with 20% down often costs more per month than renting an equivalent property once taxes, insurance, and maintenance are included. Whether buying or renting wins after 7 years depends heavily on home appreciation, rent growth, and what the renter's invested savings could have earned instead.
How to Use
- Fill in your home purchase details — price, down payment, mortgage rate, and ongoing costs.
- Fill in your renting details — monthly rent, expected annual rent increases, and an investment return assumption for redirected savings.
- Enter how many years you plan to stay.
- Compare the buyer's home equity against the renter's invested net worth at the end of that period.
Benefits
- Accounts for the opportunity cost of the down payment and extra buying costs, not just a simple payment comparison.
- Includes property tax, insurance, maintenance, HOA, closing costs, and selling costs — the full picture of homeownership costs.
- Lets you test different assumptions (appreciation, rent growth, investment return) to see how sensitive the outcome is.
Use Cases
- Deciding whether to buy a home now or continue renting and investing the difference.
- Testing how sensitive the rent-vs-buy decision is to home price appreciation assumptions.
- Understanding the true cost of homeownership beyond the monthly mortgage payment.
What Your Result Means
A positive result favoring buying means your home equity at sale is projected to exceed what a renter's invested savings would have grown to. This is highly sensitive to how long you stay (buying costs are front-loaded with closing costs) and your appreciation and investment return assumptions — small changes can flip the result.
Tips
- The number of years you plan to stay matters enormously — buying usually needs several years to overcome closing costs.
- Try more conservative and more optimistic appreciation and investment return assumptions to see how sensitive your result is.
- Remember this is a financial comparison only — stability, lifestyle, and non-financial factors matter too.
Common Mistakes
- Comparing only the monthly mortgage payment to rent, ignoring property tax, insurance, maintenance, and the opportunity cost of the down payment.
- Assuming home appreciation will always outpace what invested savings would earn — historically, this isn't guaranteed in either direction.
- Ignoring closing and selling costs, which can total 8-10% of the home's value combined and significantly affect short-stay outcomes.
FAQs
Why does the number of years I plan to stay matter so much?
Buying involves large upfront costs (down payment, closing costs) that take time to overcome through equity and appreciation — the longer you stay, the more those upfront costs are spread out and offset.
What if I don't know my exact investment return assumption?
A common conservative assumption is 6-8% annually for a diversified stock portfolio over the long term, though actual returns vary significantly and aren't guaranteed.
Does this account for tax deductions on mortgage interest?
No, this calculator doesn't model potential mortgage interest tax deductions, which could improve the buying scenario in jurisdictions where they apply.
This is a financial modeling tool based on your assumptions — actual outcomes depend on real market conditions, which cannot be predicted with certainty. This isn't financial advice.
Last updated: July 26, 2026