Rent vs Buy Calculator
The honest comparison — equity, appreciation, selling costs, and what renters earn investing the difference
On cash a renter keeps invested
1% of value is typical
Agent fees when you eventually sell
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Quick summary
The honest comparison isn't rent vs mortgage payment — it's the net cost of each path. Buying costs include interest, taxes, insurance, maintenance, and eventual selling fees, offset by equity and appreciation. Renting costs include rising rent, offset by investment returns on the cash a buyer ties up in the down payment. Transaction costs (~3% buying, ~6% selling) mean buying usually needs 4–7 years to pull ahead — the calculator finds your breakeven year.
Reviewed by Simple Calculators TeamLast reviewed
How to use this calculator
- Enter the inputs requested by the calculator.
- Choose the units or options that match your situation and review the assumptions.
- Run or update the calculation to see the result.
- Review the result, breakdown, and formulas shown on the page.
- Check the inputs, units, dates, and limitations before saving or sharing the result.
Frequently asked questions
Is it cheaper to rent or buy?
It depends on how long you stay, local price-to-rent ratios, rates, and what a renter earns investing the difference. Short stays almost always favor renting because ~9% round-trip transaction costs dominate; stays beyond 5–7 years usually favor buying as equity and appreciation compound.
What is the price-to-rent ratio?
Home price ÷ annual rent for a comparable place. Below ~15, buying is usually favorable; above ~20, renting often wins financially. A $400,000 home vs $2,000/month rent is a ratio of 16.7 — genuinely close, which is where this calculator's detailed inputs matter.
Why does the calculator credit renters with investment returns?
Because a buyer's down payment and closing costs stop earning elsewhere. A renter investing that $92,000 at 7% earns about $37,000 over five years — ignoring this opportunity cost is the most common way rent-vs-buy math gets biased toward buying.
What costs do homeowners underestimate?
Maintenance (budget ~1% of home value per year), property tax growth, insurance increases, and the ~6% selling cost at exit. On a $400,000 home, that's roughly $4,000/year in upkeep and $28,000+ when you eventually sell.
What does the breakeven year mean?
The first year when the cumulative net cost of owning drops below renting. If your breakeven is year 6 and you might relocate in 3, renting is the financially safer choice even though "buying wins eventually."
Key terms
- Opportunity Cost
- The investment return your down-payment cash would have earned if not tied up in the house — a real cost of buying.
- Price-to-Rent Ratio
- Home price ÷ annual rent; a quick market-level gauge of whether buying or renting is favorable.
- Transaction Costs
- Roughly 2–5% to buy and 5–7% to sell — the reason short ownership periods rarely pay off.
- Breakeven Year
- The year cumulative ownership costs (net of equity) fall below cumulative renting costs.
Methodology, sources & limitations
This page shows the formula, assumptions, and limitations used for this estimate. Rates, thresholds, and other time-sensitive inputs can change, so verify them against the relevant official source before relying on a result.
For our review approach and the primary sources we consult, see the methodology and source policy. If you spot an outdated figure or formula, please contact us with a correction.