How this is calculated
Both choices are simulated month by month for up to 40 years. Buying: the down payment and closing costs are paid on day one. Each month then adds the principal-and-interest payment M = P × r(1+r)^n / ((1+r)^n − 1), where P is the loan, r the annual rate ÷ 12 and n the number of payments; property tax and maintenance as a percentage of the home's value at the start of that year; insurance ÷ 12; and HOA dues. At the end of year N the home sells for price × (1 + g)^N, where g is the yearly price growth; selling costs and the remaining loan balance come out, and the rest is cash back. Renting: rent is paid monthly and rises by the rent-increase rate once a year, plus renters insurance. Opportunity cost: in any month, the choice that uses more cash gives up the return that difference would have earned, compounded monthly at the investment return ÷ 12 — for buying, starting with the day-one cash. Net cost of buying = day-one cash + mortgage payments + tax, insurance, upkeep and HOA − cash back from the sale + forgone return. Net cost of renting = rent + renters insurance + forgone return. Every year-end from 1 to 40 is compared. The break-even year is the first at which buying's net cost is at or below renting's. Buying can pull ahead and later fall behind again — for example when the investment return is well above home price growth — so a break-even year is only reported when buying stays ahead through year 40; otherwise the result lists the years in which buying is ahead.
Worked example: a $400,000 home with 20% down at 7% for 30 years (P&I $2,128.97 a month), 3% closing costs, 1% property tax, $1,800 a year insurance, 1% maintenance, 3% yearly price growth and 6% selling costs, against $2,200 rent rising 3% a year with $15 renters insurance, and a 5% investment return. After 10 years the home sells for $537,566.55; minus $32,253.99 selling costs and the $274,599.26 loan payoff, $230,713.30 comes back. Buying's net cost is $92,000 day-one cash + $255,476.40 mortgage payments + $109,710.72 tax, insurance and upkeep − $230,713.30 + $80,678.50 forgone return = $307,152.32. Renting's is $302,646.36 rent + $1,800 insurance = $304,446.36 (rent never costs more than owning here, so it forgoes no return). Renting is $2,705.96 cheaper at 10 years; buying breaks even in year 11. Each cash flow is rounded to the cent when it occurs. Income taxes, PMI and inflation adjustment are not modelled.
Disclaimer: This calculator provides educational estimates only and is not financial, tax, or investment advice. Figures are simplified and may not reflect your full situation — consult a qualified professional before making financial decisions.
This rent vs buy calculator adds up everything each choice costs over the years you expect to
stay — not just rent against a mortgage payment — then tells you which one leaves you ahead
and the year buying starts to win. It’s free, there’s no signup, and every number is worked
out in your browser.
How to use it
- The home — the price you’re considering, your down payment, the closing costs to buy,
how fast you expect prices to grow, and what selling will cost (agent commission, fees,
transfer taxes). A 100% down payment models a cash purchase.
- The mortgage — the rate you’ve been quoted and the loan term.
- Owning costs — your property-tax rate, an insurance quote, a yearly maintenance budget
as a share of the home’s value, and HOA dues if there are any.
- Renting — the rent for a comparable home, the yearly increase you expect, and renters
insurance.
- The comparison — what your spare cash would earn if invested, and how many years you
plan to stay.
The verdict, the break-even year, and a line-by-line breakdown of both sides update as you
type. The address bar keeps your scenario, so you can bookmark it or send it to a partner.
Rent vs mortgage is the wrong comparison
“Why pay someone else’s mortgage?” compares rent with a monthly payment, and that skips most
of the money. An owner also pays interest, property tax, insurance, and repairs that never come
back, plus closing costs on the way in and selling costs on the way out. The down payment isn’t
free either: it could have been invested. What owning returns — the principal you’ve repaid
and any price growth — arrives only when you sell. The fair test is the total cost of each
path net of what you walk away with, which is how this calculator is built and how the Federal
Reserve Bank of Cleveland frames the decision.
Take the worked example in the methodology below: a $400,000 home with 20% down at 7%, against
$2,200 rent. Stay five years and renting is $26,969 cheaper, because the costs of buying and
selling haven’t been earned back yet. At ten years renting is still ahead by $2,706; buying
takes the lead in year 11, and by year 15 it is $43,776 ahead. Change one input — the same home
at $2,500 rent — and buying breaks even in year 6. The two numbers that move the answer most
are how long you stay and how expensive homes are relative to rent where you live.
Before you compare, check what price your income supports with the
mortgage affordability calculator, and price
the loan itself with the mortgage payment calculator.
Where the starting numbers come from
Four defaults are published market figures, dated so you can judge how current they are:
- Mortgage rate 7.03% — Freddie Mac’s weekly survey average for a
30-year fixed loan, published for the week of September 24, 2026.
- Home price growth 2.1% — the FHFA house price index for the U.S.,
2025 Q2 to 2026 Q2. One year is a short window: FHFA’s quarterly report for the same
quarter shows 33.41% over five years, about 5.9% a
year. Try both.
- Rent increase 2.7% — the BLS consumer price index for rent of primary
residence, August 2025 to August 2026.
- Property tax 0.79% — the middle state in the Tax Foundation’s
2026 table of effective rates (2024 Census data). States range from
0.29% (Hawaii) to 1.88% (New Jersey and
Illinois), so enter your own state’s or county’s rate.
Every field marked “Example” is a placeholder to replace with your own figure. For reference,
Freddie Mac says buyers’ closing costs generally run
2%–5% of the price, and puts a seller’s
commission at 3%–8% of the sale
price plus 2%–4% in fees and taxes; the
3% and 6% examples sit toward the low end of
those ranges.
Limits and tips
- No income taxes. No mortgage-interest or property-tax deduction, and no tax on
investment gains or on the home sale.
- Fixed-rate loans only. Adjustable-rate mortgages aren’t modelled.
- Some costs stay flat. Insurance, HOA dues, and renters insurance are held at today’s
amounts; property tax and maintenance follow the home’s value, and rent steps up once a year.
- Nominal dollars. Results aren’t adjusted for inflation, and security deposits or
broker’s fees for renting aren’t included.
- Stress-test the verdict. Move the stay three years either way and home price growth a
point up or down. If the winner flips, the decision rests on a forecast, not the arithmetic.
To see how the loan balance falls year by year, open the
amortization schedule calculator; to see how
invested savings grow at a given return, try the
compound interest calculator.
Your numbers stay in your browser
The comparison runs entirely in your browser. Your numbers are kept in the page address (the
part after the “?”) so you can bookmark a scenario or share it — which also puts them in your
browser history. Typing sends nothing to us, and the site’s analytics receives page addresses
with that part removed. The privacy policy covers the rest, including what our hosting
provider handles when a page loads.
Frequently asked questions
- Is it cheaper to rent or buy a house?
- Neither is cheaper in general. The answer turns on how long you stay, how high prices are relative to rents where you live, your mortgage rate, and what your cash would earn elsewhere. Short stays usually favor renting, because the costs of buying and selling are paid once however briefly you own. Long stays usually favor buying, because rent keeps rising while a fixed-rate payment does not — but if your savings would grow much faster than the home’s value, renting can pull ahead again later. The result above lists the years in which buying comes out ahead for your numbers.
- Is paying rent just throwing money away?
- No more than mortgage interest is. What a renter gives up is the forced saving and leverage of owning: every mortgage payment repays some of the loan whether or not you would have saved that money, and a price rise applies to the whole home, not just your down payment. This calculator assumes the renter invests the down payment and any monthly savings instead; if that money would be spent, owning comes out better than shown. Leverage cuts both ways, too — set home price growth a few points below zero to see a sale that doesn’t cover the loan.
- Why does it count investment returns on the down payment?
- Cash tied up in a house cannot earn anything elsewhere. A renter who keeps the down payment and closing costs could invest them, so the return they would have earned is a real cost of buying. It runs the other way too: in months when renting costs more than owning, the renter gives up the return on that difference. Set the investment return to 0% to compare on cash alone.
- Why does it leave out the mortgage interest tax deduction?
- The deduction only helps if you itemize, and itemizing only pays when your deductions add up to more than the standard deduction — for many homeowners they don’t. Getting it right needs your whole tax return, so the calculator leaves income taxes out rather than guess. If you do itemize, your real cost of buying is somewhat lower than shown. Tax on investment gains, also left out, usually tilts the result the same way: it would shrink the investment return charged to whichever choice ties up more cash, and that is normally buying.
- Does it include PMI if I put less than 20% down?
- No. Freddie Mac notes that buyers putting down less than 20% pay private mortgage insurance monthly until they build 20% equity. To approximate it, add your lender’s monthly PMI quote to the HOA field; because that field runs for the whole stay, it will slightly overstate the cost of buying.