Rent vs Buy Calculator
Comparing a mortgage payment against a rent payment always favours buying, because part of a mortgage payment is savings and all of a rent payment is not. This compares what you are worth at the end instead — with the renter investing the deposit the buyer spent.
Buying
Renting, and what the money would do instead
After 10 years
Renting is ahead by $48,438
Buying does not catch up within 10 years.
- If you buy: equity after selling costs, plus savings$245,730
- If you rent: the invested deposit, plus savings$294,169
How this was worked out
- The assumption that decides itHouses 3% a year against investments 6% a year
- Buying costs up front$420,000 × 20% deposit, plus 3% to buy and 6% to sell at the end
- Held every year1.1% property tax and 1% maintenance on the price, plus $150 a month of insurance and fees
- The renter, meanwhile$2,100 a month rising 3% a year, with the deposit invested
- Worth after 10 yearsRenting ahead by $48,438
Year by year
| Year | Home value | Owed | If you buy | If you rent |
|---|---|---|---|---|
| 1 | $432,600 | $332,244 | $74,400 | $113,775 |
| 2 | $445,578 | $328,237 | $90,606 | $131,478 |
| 3 | $458,945 | $323,962 | $107,447 | $149,724 |
| 4 | $472,714 | $319,400 | $124,951 | $168,530 |
| 5 | $486,895 | $314,533 | $143,149 | $187,915 |
| 6 | $501,502 | $309,340 | $162,072 | $207,896 |
| 7 | $516,547 | $303,799 | $181,756 | $228,492 |
| 8 | $532,043 | $297,886 | $202,234 | $249,723 |
| 9 | $548,005 | $291,578 | $223,546 | $271,608 |
| 10 | $564,445 | $284,848 | $245,730 | $294,169 |
- Money gone for good if you buy (interest, tax, upkeep, fees)$370,659
- Money gone for good if you rent (rent paid)$288,890
- Mortgage payment$2,123.75
- Loan$336,000
A comparison of two sets of assumptions, not a verdict on either. How long you stay is doing most of the work: buying and selling together cost about a tenth of the price at the figures above, and a short stay does not earn that back. The buyer is assumed to sell at the end of the period, so the cost of selling is always charged even if you would not sell. Mortgage insurance is not modelled at all, so buying on a deposit under a fifth of the price looks cheaper here than it is. And a house is a single undiversified asset that you also have to live in, which no net-wealth figure can capture.
Both people are assumed to invest whatever the cheaper option saves them, at 6% a year. Income tax is left out entirely — no mortgage interest deduction, no capital gains tax on the investments — because all three are specific to where you live and they push the answer in opposite directions. The result moves a long way on the appreciation and investment return you type, and nobody knows either of them in advance.
The worked examples below are in US dollars. The tool itself works in whichever currency you pick above, and never converts between them — what you type is what it does the arithmetic on.
The comparison almost everyone makes is the wrong one
“My mortgage payment would be less than my rent” is the sentence that sells houses, and it settles nothing. Part of a mortgage payment buys equity; the interest, the property tax, the upkeep and the fees do not. Rent is entirely gone. And the deposit that goes into the house could have been invested somewhere else, which is a real cost even though nothing leaves your account.
This tool compares the two on what you are worth at the end instead. Both people start with the same cash: the buyer spends it on a deposit and the cost of buying, the renter invests it. In any month where one option costs more, whoever has the cheaper one invests the difference at the same return. At the horizon the buyer sells — home value, less what is still owed, less the cost of selling — and the two totals are put side by side.
A worked example: a $420,000 house against $2,100 rent
A $420,000 home with 20% down at 6.5% over 30 years is a $2,123.75 payment. Add property tax at 1.1%, maintenance at 1% of the value, and $150 of insurance and fees, and the first month of owning costs $3,009 against $2,100 of rent. Buying the house also takes $96,600 in cash up front — the $84,000 deposit plus 3% in closing costs.
Run that for ten years at 3% appreciation, 3% rent rises, a 6% investment return and 6% to sell, and the buyer ends with $245,730: a house worth $564,445, less the $284,848 still owed, less the cost of selling. The renter ends with $294,169, having invested the deposit and the monthly difference throughout. Renting wins by $48,438. Rent would have to start at $2,362 rather than $2,100 for the two to finish level.
Nothing about that is a verdict on buying. Extend the same figures to thirty years and it reverses: buying pulls ahead in year 27 and finishes $32,244 in front, because rent keeps rising while the mortgage payment does not.
Why the honest answer is a range
Two inputs dominate everything else, and neither is knowable in advance: what the house does and what the investments do. A point on either can move a ten-year result by tens of thousands. Anyone who tells you buying is always the better financial decision is quietly assuming values for both.
The third thing that moves the answer is how long you stay. Buying and selling together cost roughly a tenth of the price here — 3% to buy and 6% to sell — and that is paid whether you stay two years or twenty. Spread over two years it is crushing; over twenty it barely registers.
The assumptions you are agreeing to
Income tax, entirely: no mortgage interest deduction, no capital gains tax on the renter’s investments, no tax on a gain when the house is sold. Each is specific to where you live and they push the result in opposite directions. Guessing at all three would add precision without adding accuracy.
- Both people are assumed to invest every dollar the cheaper option saves them, which is a strong assumption about a renter.
- Rent steps up once a year at renewal rather than creeping up monthly.
- Nothing here counts the things that are not money: security of tenure, a landlord who will not renew, or the freedom to leave in a month.
Break-even years and investing the difference
How many years do I need to stay for buying to make sense?
It depends entirely on the numbers you enter, which is why this tool reports a break-even year rather than a rule. In the example above it is year 27; raise the appreciation rate or lower the investment return and it can fall under five.
Why does the renter get to invest anything?
Because otherwise the comparison is rigged. The buyer’s deposit is not spent, it is moved into an asset; if the renter’s equivalent cash is left sitting in a drawer earning nothing, buying wins before the arithmetic starts.
Should I include the mortgage interest deduction?
This tool does not model it, and for most US filers since the standard deduction rose in 2018 it makes no difference at all, because they no longer itemise. If it genuinely applies to you, treat the result here as slightly pessimistic about buying.