Rent vs Buy Calculator
"Rent is throwing money away" — is it? This calculator prices both paths honestly: the down payment you could have invested, the equity you build, rent rising every year, and the true cost of owning. Enter your numbers to find your breakeven year.
Your inputs
The home
Cost of owning
Renting
Assumptions
True cost of buying vs renting over time
What this means
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The mistake everyone makes
Most rent-vs-buy comparisons line up the monthly mortgage payment against monthly rent and call it a day. That misses the two biggest forces in the decision. First, the opportunity cost: every dollar sunk into a down payment, closing costs, and extra monthly ownership costs is a dollar that could have been compounding in an index fund. Second, rent rises while the mortgage doesn't — a fixed payment looks expensive in year 1 and cheap in year 15. The honest question is never "which monthly payment is lower today" but "which path leaves me richer at the end."
The math: true cost, not monthly cost
Each month, the model totals the full cost of owning (mortgage payment + property tax + insurance + maintenance + HOA on the appreciated home value) and the cost of renting (rent, growing yearly). Whoever spends less that month invests the difference at your assumed return. The down payment and closing costs are treated as invested from day one on the renting side. At each year-end, true cost = everything spent, grown at the investment return, minus what you have to show for it (home equity for the buyer, the investment portfolio for the renter). The breakeven year is the first year buying's true cost drops below renting's.
NetCostrent(t) = FV(all rent paid) − investment portfolio
Breakeven = first year t where NetCostbuy(t) < NetCostrent(t)
Worked example
Take the defaults: a $500,000 home, 20% down, 6.5% mortgage, versus $2,500/month rent, over 10 years. Owning costs about $3,588/month in year one against $2,575 in rent — so the renter invests the ~$1,000 monthly difference plus the full $115,000 upfront (down payment + closing). After 10 years the buyer has built $356,610 in equity, but the true cost of buying is $507,301 versus $116,008 for renting. Renting wins the full horizon here: at a 0.5%-of-price monthly rent and 6.5% mortgage rates, the math favors the renter. Nudge the rent up to $4,000/month, though, and buying pulls ahead in year 6 — small input changes swing the verdict hard.
Assumptions and caveats
- No mortgage-interest tax deduction. Since the standard deduction rose, most buyers don't itemize — modeling the deduction would flatter buying for a minority.
- Selling is assumed at the horizon. Equity is stated net of selling costs, as if you sold in the final year.
- Mortgage payments stop when the loan is paid off. Taxes, insurance, maintenance, and HOA continue.
- Constant rates. Appreciation, rent growth, and investment returns are smooth annual rates — reality is lumpy, and the sequence matters.
- Non-financial factors are real. Stability, control over your space, and freedom to move have value this calculator can't price. Use the verdict as an input, not a command.
Method note: this follows the opportunity-cost framework popularized by the New York Times rent-vs-buy calculator — every dollar is grown at the assumed investment return so both paths are compared in the same year's dollars.