⚖️Rent vs. Buy Calculator
Compare the financial cost of renting versus buying a home over time.
Last updated: January 4, 2026
How to Use the Rent vs. Buy Calculator
- Enter Home Price: The target property cost.
- Rent Comparison: What would it cost to rent a similar home?
- Timeline: How long do you plan to stay? Buying usually wins over longer periods due to transaction costs.
- Market Assumptions: Adjust appreciation and interest rates to see different scenarios.
Formula & Methodology
Rent vs. Buy Analysis
We compare the total cost of ownership vs. renting by simulating wealth accumulation over time.
Inputs:
- Initial Capital: We assume you have the Down Payment + Buying Costs available.
- Renter Scenario: You invest this Initial Capital. You pay rent. If Rent < Buying Cost, you invest the difference.
- Buyer Scenario: You use the capital to buy. You pay Mortgage + Taxes + Maint + Ins. If Buying Cost < Rent, you invest the difference.
Net Worth Calculation:
$$ \text{NW Rent} = \text{Investment Portfolio Value} $$
$$ \text{NW Buy} = (\text{Home Value} - \text{Loan Balance} - \text{Selling Costs}) + \text{Buyer Investments} $$
Key Factors:
- Opportunity Cost: The return you miss out on by tying up cash in a home (Down Payment).
- Appreciation: How fast the home value grows.
- Amortization: Paying down the loan principal increases equity.
- Inflation: Rents and Expenses tend to rise over time.
Deciding whether to rent or buy a home is a complex financial decision that goes far beyond comparing a monthly mortgage payment to rent. Our advanced Rent vs. Buy Calculator helps you simulate your net worth over time by accounting for opportunity costs, inflation, taxes, and market returns.
By inputting your local housing market data, you can find your break-even year—the point where buying becomes financially superior to renting.
Understanding the Price-to-Rent Ratio
Real estate investors often use the Price-to-Rent Ratio to determine if a market is undervalued or overheated. It is calculated as:
Price-to-Rent Ratio = Median Home Price / Annual Rent
- Ratio 1-15: Much better to buy. Homes are relatively cheap compared to rent.
- Ratio 16-20: Typically better to rent, but buying can make sense for long-term stays.
- Ratio 21+: Much better to rent. Home prices are high relative to the income they generate.
The Power of Opportunity Cost
The biggest factor often ignored in the "rent vs buy" debate is Opportunity Cost.
When you buy, you lock up a large Down Payment (e.g., $50,000) in the house. If you rented instead, that $50,000 could be invested in the S&P 500 or other assets. Over 30 years, the compound growth of that invested capital often rivals or beats real estate appreciation.
Our calculator uniquely handles this: We simulate an investment portfolio for the Renter using the Down Payment cash and any monthly savings difference. This provides a fair "Applys-to-Apples" net worth comparison.
The 5% Rule Explained
Specific to high-interest environments, the 5% Rule is a quick heuristic to gauge affordability. It estimates the annual cost of capital and maintenance at 5% of the property value.
| Home Price | 5% Annual Cost | Break-Even Monthly Rent |
|---|---|---|
| $300,000 | $15,000 | $1,250 |
| $500,000 | $25,000 | $2,083 |
| $800,000 | $40,000 | $3,333 |
Note: If you can rent a similar home for LESS than the Break-Even Rent, renting is mathematically cheaper (using this simplified rule).
About Rent vs. Buy Calculator
Our rent vs. buy calculator is a free, easy-to-use tool designed to help youcompare the financial cost of renting versus buying a home over time.. For professionals or those who need quick calculations, our calculator provides accurate results instantly.
Frequently Asked Questions
The year when the accumulated net worth of buying exceeds that of renting. Selling before this year typically means you lose money compared to renting.
Yes, we assume an annual maintenance cost of 1% of the home value, which increases slightly over time.
This simple calculator does not factor in mortgage interest tax deductions, as they depend heavily on individual filing status and standard deduction limits.