Rent vs Buy Calculator
Compare the true all-in cost of renting versus buying to find which makes more financial sense in your situation.
Renting is not throwing money away. Buying is not always an investment. Both statements are oversimplifications, and both get repeated constantly. The actual comparison depends on your market, your time horizon, and what you'd do with the down payment capital if you rented instead. This calculator runs the full comparison.
The opportunity cost of the down payment matters. $76,000 invested in a diversified portfolio at 7% grows to $120,000 in 7 years. That's real wealth not built if the money goes to a down payment.
What most rent vs buy comparisons miss
Simplified comparisons compare rent to a mortgage payment and declare buying cheaper when the mortgage is lower. This misses property taxes, insurance, maintenance, HOA fees, and closing costs on the buy side, and misses the opportunity cost of the down payment on the rent side. A full comparison accounts for all of these. The break-even point where buying becomes cheaper than renting typically ranges from 3 to 7 years depending on the market.
The opportunity cost of the down payment
The down payment is not free money, it's capital with an opportunity cost. If you put $76,000 into a home, that's $76,000 not invested in the market. At 7% annual return over 7 years, that capital grows to roughly $120,000. The home needs to appreciate by that amount just to break even with the alternative investment, and the home's appreciation doesn't account for the carrying costs (taxes, insurance, maintenance) that an investment portfolio doesn't have.
Home appreciation and equity building
Appreciation builds wealth on both the portion you own and the portion the bank owns, leverage amplifies gains. A $380,000 home appreciating at 3.5% annually is worth about $502,000 in 7 years, a $122,000 gain. You also build equity through mortgage payments. Together, these can create substantial wealth. The question is whether this beats what the down payment would have earned invested elsewhere, minus the carrying costs of ownership.
The time horizon problem
Buying becomes more financially advantageous the longer you stay. Closing costs (2–5% of purchase price) are a front-loaded fixed cost that gets amortized over time. In the first 2–3 years, renting is almost always cheaper even in appreciating markets. Beyond 5–7 years, buying typically wins in most US markets. If you're uncertain whether you'll stay for 5+ years, the financial case for buying weakens significantly.
Non-financial factors
The financial comparison isn't the only factor. Buying provides stability, the freedom to renovate and customize, and potential emotional value. Renting provides mobility, flexibility, and freedom from maintenance responsibility. For people in transitional life stages, new jobs, potential relocations, uncertain family plans, renting's flexibility may be worth a significant financial premium. For people with stable situations who plan to stay, the financial case for buying strengthens considerably.
Frequently asked questions
What's the break-even point?
Run this calculator at different year values to find where buying total cost (net of equity) drops below renting total cost. That's your break-even point. If you're confident you'll stay beyond it, buying makes financial sense. If you might move before it, renting is lower risk.
Does this account for tax deductions?
No. Mortgage interest and property tax deductions can reduce the effective cost of buying, but the 2017 tax law changes (SALT cap, higher standard deduction) reduced itemizing benefits for most buyers. If you itemize and deduct significant mortgage interest, the true cost of buying is lower than shown here.
What appreciation rate should I use?
US home prices have appreciated at roughly 3–4% nationally over the long run, but local markets vary enormously. High-demand coastal markets have averaged 5–7%+ annually for decades. Some Midwest markets average 1–2%. Use a conservative local estimate, appreciation is uncertain and front-loading your assumptions with optimism skews the comparison.