Rent vs Buy Calculator
Should you rent or buy? Compare the true total cost of each option over time, including hidden costs, opportunity cost of your down payment, and net worth impact.
Buying Costs
Renting Costs
Investment & Time Horizon
Return you'd earn investing the down payment instead
Renting is cheaper
Over your 10-year time horizon, renting saves you money.
Monthly Cost Comparison
Buying (Month 1)
$0
Renting (Month 1)
$0
Key Metrics
Break-Even Year
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Price-to-Rent Ratio
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5% Rule Threshold
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Total Cost Over 10 Years
Net Worth at Year 10
If You Buy
$0
Home equity after selling
If You Rent
$0
Investment portfolio value
Net Worth Advantage
$0
Year-by-Year Comparison
| Year | Buy Total | Rent Total | Difference | Winner |
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Important Notes
- Opportunity cost: Your down payment could be invested in the stock market instead. This calculator accounts for that lost investment growth.
- Hidden buying costs: Closing costs (2-5%), selling costs (~6% agent fees), moving expenses, repairs, and potential special assessments are often overlooked.
- Tax benefits: This calculator does not factor in the mortgage interest deduction, which may benefit buyers who itemize deductions.
- Lifestyle factors: Flexibility to move, no landlord restrictions, building equity, and personal preference are real factors that numbers cannot capture.
- Selling costs: When you sell, expect to pay ~6% in real estate agent commissions. This is factored into the net worth calculation.
Understanding the Rent vs Buy Decision
The 5% Rule
The 5% rule is a quick way to compare renting and buying. Multiply the home's value by 5%, then divide by 12 to get a monthly "break-even" rent. If you can rent for less than that amount, renting is likely the better financial choice.
The 5% covers three unrecoverable costs of ownership:
- ~1% property taxes -- money paid to the government, not building equity
- ~1% maintenance -- roof repairs, HVAC, plumbing, appliances, etc.
- ~3% cost of capital -- mortgage interest plus the opportunity cost of your down payment being locked in the house instead of invested
For a $400,000 home: $400,000 x 5% / 12 = $1,667/month. If you can rent for less, renting wins financially.
Price-to-Rent Ratio
The price-to-rent ratio is another useful metric. Divide the home price by the annual rent to get the ratio:
In expensive coastal cities like San Francisco and New York, price-to-rent ratios often exceed 30, making renting the smarter financial move for many people. In the Midwest and South, ratios closer to 10-15 make buying more attractive.
What This Calculator Does Not Capture
Numbers only tell part of the story. Buying a home offers stability, creative freedom, and the forced savings of building equity. Renting offers flexibility to relocate, zero maintenance burden, and the ability to invest more aggressively. Consider your career trajectory, family plans, and how long you plan to stay in one place before making this decision.