Rent vs Buy Calculator

Rent versus buy is the hardest housing decision because the intuitive comparison (monthly mortgage vs monthly rent) gets the answer almost always wrong. The right comparison is total out-of-pocket cost over the holding period, minus the equity you would walk away with if you sold at the end. A mortgage payment that is higher than the comparable rent can still come out ahead because most of it is building equity; a lower mortgage payment can still lose to rent if maintenance and property tax are high and you sell within a few years.

This calculator does the net-of-equity math. Enter the home price, down payment, mortgage rate and term, annual property tax and insurance, a maintenance percentage, the comparable monthly rent, and how many years you plan to stay. Also set expected home and rent appreciation for your local market. The tool computes total monthly cost of owning (mortgage plus tax plus insurance plus maintenance), total rent paid over the period with annual rent increases, and net cost of owning after subtracting the equity built through principal paydown and home appreciation.

The output names a dollar winner at the end of the holding period. Short holds (under 5 years) often favor renting because closing costs and appreciation have not overcome them yet. Long holds (10+ years) usually favor owning once equity and appreciation compound. The breakeven horizon depends heavily on local rent-to-price ratio, which this tool exposes as explicit inputs. See the methodology page for how we treat closing costs and selling costs (omitted here for simplicity; real decisions should include them).

Monthly mortgage payment uses the standard amortization formula M = P × r × (1+r)^n / ((1+r)^n - 1), where P is the loan amount, r is the monthly interest rate, and n is total months. This is the same formula codified in 12 CFR 1026.18 (Truth in Lending Act disclosure requirements for closed-end mortgages).

Monthly cost of owning = mortgage_payment + (home_price × property_tax_pct) / 12 + (insurance / 12) + (home_price × maintenance_pct) / 12.

Total rent over N years is the sum of monthly_rent × 12 × (1 + rent_appreciation)^(Y-1) for each year Y from 1 to N, approximating year-by-year rent inflation.

Net cost of owning = total_monthly_paid + down_payment - equity_at_end, where equity at end = future_home_value - remaining_loan_balance. Future home value uses compound appreciation home_price × (1 + home_appreciation)^N. Remaining loan balance after N years uses the standard amortization balance formula B = P × ((1+r)^n - (1+r)^p) / ((1+r)^n - 1) where p is months paid.

The calculator does not include closing costs (typically 2-5% of home price on purchase and 6-8% on sale including agent commissions), the opportunity cost of the down payment if invested elsewhere, or tax benefits from mortgage interest deduction. Those can shift the answer by tens of thousands of dollars on a multi-year hold and should be weighed in any real decision.

Use this before putting an offer on a house to pressure-test the hold horizon against market rents, or to decide whether to sell a primary residence vs. continue owning. For a more precise answer, factor in closing costs (add 2-5% on purchase and 6-8% on sale to the owning side), the opportunity cost of the down payment (if invested at 7% returns, the comparison tilts toward renting), and any itemized mortgage-interest tax deduction. Pair with the cap rate calculator if you are considering the same property as a rental instead.