Rent vs. Buy Calculator
Should You Rent or Buy? Compare Total Costs & Find Your Break-Even Point
🏠 Interactive Rent vs. Buy Comparison
🏡 Home Purchase Details
💵 Ongoing Homeownership Costs
🔑 Rental Details
📈 Growth & Investment Assumptions
Return if renting & investing difference
🏠 Understanding the Rent vs. Buy Decision
✅ When to Buy
• Staying 5+ years: Enough time to recoup buying costs
• Stable income: Can afford mortgage + 20% cushion
• Down payment ready: 20% saved plus emergency fund
• Want stability: Control over property and no rent increases
✅ When to Rent
• Moving soon: Living in area less than 5 years
• Career uncertainty: Job changes or location flexibility needed
• Limited savings: Can't afford down payment + emergency fund
• No maintenance: Landlord handles repairs and issues
📊 Key Factors
• Break-even point: Typically 3-7 years to recover costs
• Price-to-rent ratio: If >20, renting often better short-term
• Opportunity cost: Compare home equity vs. investments
• Tax benefits: Mortgage interest & property tax deductions
💡 Hidden Costs
• Buying: Closing costs, maintenance, property tax, insurance
• Selling: Agent commissions (6%), repairs, staging
• Ownership: Major repairs (roof, HVAC, foundation)
• Time cost: Managing property, dealing with issues
💰 Typical Costs: Renting vs. Buying
⚠️ Important: Costs vary significantly by location, property type, and market conditions. Use this as a general guide only.
Break-Even Timeline Scenarios
🔢 Key Formulas for Comparison
Essential Calculation Formulas:
1. Monthly Mortgage Payment:
M = P × [r(1+r)ⁿ] ÷ [(1+r)ⁿ - 1]
P = loan amount, r = monthly interest rate, n = number of payments
2. Total Cost of Buying (after N years):
Buying Cost = Down Payment + Closing Costs + (Mortgage + Tax + Insurance + Maintenance) × N years - Home Equity Gained
3. Total Cost of Renting (after N years):
Renting Cost = Σ(Rent × (1 + Rent Increase Rate)ⁱ) + Renter's Insurance - Investment Growth of Savings
Sum over i = 0 to N years
4. Price-to-Rent Ratio:
Ratio = Home Price ÷ (Annual Rent)
Below 15: favor buying | 15-20: neutral | Above 20: favor renting
5. Break-Even Point (years):
When: Total Buying Costs = Total Renting Costs
Solve for N where both equations equal (typically 3-7 years)
💡 Essential Rent vs. Buy Facts
Critical Information for Your Decision:
📌 The 5-Year Rule:
Only buy if you plan to stay at least 5 years. Why? It takes 3-7 years to recoup buying costs (closing costs, selling costs, maintenance). In first few years, most mortgage payment is interest, not equity. Short-term ownership = guaranteed loss due to transaction costs (3% closing + 6% selling = 9% of home value).
📌 Price-to-Rent Ratio is Key:
Divide home price by annual rent for equivalent property. Ratio below 15: buying generally better. 15-20: depends on factors. Above 20: renting often better financially. Example: $400K home / $2K rent ($24K/year) = 16.7 ratio (borderline). NYC/SF often have ratios 30-40, strongly favoring renting short-term.
📌 Don't Forget Opportunity Cost:
Tying up $80K in a down payment means missing investment returns. If stock market returns 8%/year, that's $6,400/year in lost gains. Over 10 years with compounding, $80K becomes $173K invested vs. potentially $140K in home equity (3% appreciation). Compare total return: home equity + tax benefits vs. investment portfolio growth.
📌 Hidden Homeownership Costs Add Up:
Mortgage isn't your only cost. Budget 1-2% of home value annually for maintenance ($4,000-8,000/year on $400K home). Plus property tax (0.5-2.5% = $2,000-10,000/year), insurance ($1,000-2,000), HOA ($0-600/month), and major repairs (roof $10K, HVAC $8K, foundation $15K+). Total ownership cost typically 50-100% more than mortgage payment alone.
📌 Tax Benefits Are Overrated (Post-2017):
The 2017 tax law doubled standard deduction to $12,950 (single) / $25,900 (married), meaning most homeowners don't itemize anymore. Mortgage interest deduction only helps if your total itemized deductions exceed standard deduction. For many, tax benefit is $0-3,000/year, not the huge savings often claimed. SALT deduction capped at $10,000 reduces benefits further.
📌 Flexibility Has Real Value:
Renting provides career mobility worth thousands in increased earnings. Taking better job in another city easily adds $10,000-50,000/year to income. Homeowners often decline opportunities due to selling hassle, costs, timing. In your 20s-30s, career flexibility can be more valuable than home equity. Also consider: divorce, job loss, or lifestyle changes—easier as renter.
❓ Frequently Asked Questions
Is buying always better than renting long-term?
Not always. It depends on: (1) Price-to-rent ratio in your market (2) How long you stay (3) Opportunity cost of down payment (4) Actual appreciation rates (5) Your tax situation. In expensive coastal cities with ratios >25, renting + investing difference often beats buying even over 20+ years, especially if you can invest disciplined. Run the numbers for YOUR specific situation—don't rely on generalizations.
How do I calculate the break-even point?
Calculate total costs for both options over time: Buying = down payment + closing costs + all monthly costs + selling costs - equity gained. Renting = cumulative rent + insurance + opportunity cost of invested down payment. Break-even is when buying costs < renting costs. Typically 3-7 years depending on market. Use this calculator or spreadsheet to model your specific numbers including appreciation and investment returns.
What if home prices drop?
This is major risk of buying. If you buy at $400K and prices drop 20%, you've lost $80K in equity (your entire down payment). You're "underwater" if you owe more than home is worth. 2008 crisis saw 30-50% drops in some markets. To protect yourself: (1) Buy in stable markets with diversified economies (2) Put 20%+ down (3) Plan to stay 10+ years (4) Maintain emergency fund (5) Don't overextend on mortgage. Renters are insulated from price drops—major advantage in uncertain markets.
Should I include maintenance in rent vs. buy comparison?
Absolutely—it's huge cost people forget. Budget 1-2% of home value annually ($333-667/month on $400K home). This includes: routine repairs (plumbing, electrical), major replacements (roof every 20 years, HVAC every 15 years, water heater every 10 years), lawn care, pest control, HOA fees. Renters pay $0 for maintenance—landlord's responsibility. Over 10 years, that's $40,000-80,000 extra cost of ownership. Always include in calculations.
How much should I have saved before buying?
Minimum: (1) 20% down payment to avoid PMI ($80K on $400K home) (2) 3-5% closing costs ($12,000-20,000) (3) 6 months expenses emergency fund ($15,000-30,000) (4) Moving/furniture budget ($5,000-10,000). Total: $112,000-140,000 for $400K home. Can buy with less? Yes, but risky. Lower down payment = higher monthly payment + PMI ($200-300/month). No emergency fund = potential foreclosure if job loss or major repair. Don't rush—save properly first.
What about building equity vs. "throwing money away" on rent?
This is misleading comparison. With 30-year mortgage at 6.5%, you pay more in interest than principal for first 15 years—also "throwing away" money. Plus property tax, insurance, maintenance—all gone forever. Renters can invest the difference between rent and ownership costs. If rent is $2,000 and ownership costs $3,500, invest $1,500/month at 7% return. After 10 years: $258,000 in investments vs. maybe $120,000 in home equity. Equity building matters, but so does opportunity cost.
⚠️ Important Disclaimer
This calculator provides estimates for educational and planning purposes only. Results are based on assumptions and simplified models that may not reflect your actual situation.
Actual outcomes depend on many factors including:
- Actual home appreciation or depreciation rates
- Investment returns (may be higher or lower)
- Personal tax situation and deductions
- Interest rate changes if refinancing
- Unexpected maintenance or repair costs
- Local market conditions and economic factors
- Life changes (job, family, health, divorce)
Always consult with qualified professionals including financial advisors, tax professionals, and real estate experts before making major housing decisions. Consider both financial and personal factors—sometimes the "wrong" financial choice is the right life choice.
👨🏫 About the Author
Adam Kumar
Co-Founder @ RevisionTown
Adam is a mathematics education expert with extensive experience across multiple international curricula including IB (International Baccalaureate), AP (Advanced Placement), GCSE, IGCSE, and various national systems. His expertise in mathematical modeling, financial calculations, and quantitative analysis enables him to create practical decision-making tools.
Through RevisionTown, Adam has helped thousands of students master complex mathematical concepts including compound interest, present value calculations, and cost-benefit analysis. This rent vs. buy calculator applies rigorous mathematical principles to one of life's biggest financial decisions.
Adam's background in teaching quantitative reasoning across diverse educational systems enables him to break down sophisticated financial comparisons into clear, understandable frameworks that help people make informed housing decisions based on data, not emotion.
📧 Email: info@revisiontown.com
💼 LinkedIn: Connect with Adam