Rent vs. Buy Calculator

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Home Price ($)

Down Payment ($)

Mortgage Rate (%)

Monthly Rent ($)

Years in Home 7 years

Home Appreciation 3%/yr

Tips

🏠The break-even point for buying vs. renting is typically 5–7 years.
💡Renting isn't 'throwing money away' — you're buying flexibility and investing the down payment.
📊In high-appreciation markets, buying wins faster; in slow markets, renting often wins short-term.

Rent vs. buy: the question most people get wrong

'Renting is throwing money away' is one of the most persistent myths in personal finance. It is repeated so often that many people buy homes before they are ready — financially or personally — because they feel that renting is financially irresponsible. The reality is more nuanced: renting is sometimes the better financial decision, and buying can be the worse one, depending on your situation, your timeline, and the market you are in.

The rent vs. buy decision is not just about comparing monthly payment to monthly rent. It involves opportunity cost (what else could your down payment earn?), transaction costs (buying and selling a home typically costs 8–10% of the home price in agent commissions, closing costs, and moving costs), maintenance and repairs (renters pay none; homeowners budget 1–2% of home value annually), and time horizon (how long you plan to stay).

The true costs of homeownership

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Principal and interest
The mortgage payment that most people compare to rent. On a $350,000 loan at 7%, this is about $2,329/month for 30 years.
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Property taxes
Typically 0.5–2.5% of home value annually, depending on location. On a $400,000 home in a 1.2% tax area, that is $400/month added to your housing cost.
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Homeowner's insurance
Roughly 0.5–1% of home value annually, or $167–$333/month on a $400,000 home. Required by lenders.
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Maintenance and repairs
Budget 1% of home value per year as a minimum. On a $400,000 home: $333/month. This is often invisible until a major repair hits — roof ($8,000–$15,000), HVAC ($5,000–$10,000), water heater ($1,500–$3,500).
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PMI (if down payment < 20%)
Private Mortgage Insurance adds 0.5–1.5% of loan amount annually until you reach 20% equity. On a $320,000 loan, that is $133–$400/month.
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Transaction costs
Buying a home costs 2–5% of purchase price in closing costs ($8,000–$20,000 on a $400,000 home). Selling costs 5–6% in agent commissions plus additional closing costs. These are sunk costs that must be recouped through appreciation before you break even.

The break-even point: how long must you stay?

The break-even point is the number of years you must own a home before buying becomes better than renting. Below the break-even point, a renter who invested the down payment would come out ahead. Above it, the homeowner — through equity building and appreciation — typically wins.

The break-even point depends heavily on local conditions. In markets where home prices appreciate rapidly and rent-to-price ratios are high (rents are high relative to home prices), buying breaks even faster. In markets with flat or declining appreciation and low rent-to-price ratios, renting may win even over 10+ years. The NYT rent-vs-buy calculator (which uses assumptions similar to ours) often shows break-even points of 5–10 years in most US markets.

Example: Renting vs. buying in Houston — a concrete comparison

A $350,000 home vs. renting a comparable unit for $2,000/month. Buying: $2,329 P&I + $350 taxes + $175 insurance + $292 maintenance = $3,146/month. Renting: $2,000/month. Down payment of $70,000 invested at 7% grows to ~$137,000 over 10 years. After 7–8 years, the homeowner's equity and appreciation generally catches up to the renter's investment gains — making the break-even roughly 7–8 years in this scenario.

Frequently asked questions

It depends on appreciation rates and investment returns. Home equity grows through principal paydown and price appreciation. A comparable amount invested in a diversified portfolio grows through market returns. Historically, stocks have outperformed housing on a raw return basis, but homes provide leverage (you control a $400,000 asset with $80,000 down) and forced savings that many people would not achieve otherwise.

Price-to-rent ratio = home price ÷ annual rent. A ratio below 15 generally favors buying; above 20 generally favors renting. In expensive cities, ratios of 30–40+ are common, strongly suggesting renting is the better financial choice. In many Midwestern and Southern cities, ratios below 15 make buying quite attractive.

Yes: flexibility to move for career opportunities, no exposure to maintenance costs or market downturns, no transaction costs, and the ability to invest the down payment in potentially higher-returning assets. Renters also carry no mortgage debt, which reduces financial fragility.

The Tax Cuts and Jobs Act of 2017 roughly doubled the standard deduction, meaning fewer homeowners itemize. If you do not itemize, the mortgage interest deduction provides no tax benefit. The deduction is most valuable for high earners in high-tax states with expensive mortgages who itemize.

Stability and roots in a community, ability to customize and renovate your space, privacy, outdoor space, pet freedom, and the psychological sense of ownership. These are real values that cannot be captured in a calculator. The financial case for renting can be strong while the personal case for buying is compelling — and that is a legitimate reason to buy.