In Short
Buying usually costs more at first, because of the down payment, closing costs and upkeep, and pays off the longer you stay. A $400,000 home with 20% down at 6.5% costs about $2,889 a month to own versus $2,415 to rent; at 3% growth, buying pulls ahead in year 8 and leads by about $25,000 after 10 years. Move after 3 years and renting comes out about $24,000 ahead [1].
How to Use the Rent vs Buy Calculator
- Enter the home price, down payment, mortgage rate and term.
- Add property tax, insurance, HOA, upkeep, and the costs to buy and sell.
- Enter the rent for a similar home, how fast rent and home values grow, and what your savings could earn invested.
- Set how long you'll stay, or tap Say It All: “Home price 400,000 with 20 percent down at 6.5 percent, rent is 2,400 a month, staying 10 years.”
The Formula
Both paths get the same budget. The buyer pays the down payment and closing costs up front; the renter invests that money instead. Each month, whichever path costs less invests the difference. At the end of each year the calculator compares what each would have if the home were sold [1][2].
- Owner cost = mortgage payment + property tax + insurance + HOA + upkeep
- Renter cost = rent + renters insurance
- Wealth if you buy = home value − loan balance − selling costs + invested savings
- Wealth if you rent = (down payment + closing costs) invested + each month's difference invested
- Breakeven = the first year wealth if you buy ≥ wealth if you rent
Worked Examples
| Scenario | Inputs | Result |
|---|---|---|
| Staying 10 years | $400,000 home, 20% down, 6.5%/30 yrs, $2,400 rent, 3% growth, 6% return | Buying ahead by $24,981 · breakeven year 8 |
| Moving after 3 years | Same home and rent, stay 3 years | Renting ahead by $24,086 |
| Moving after 5 years | Same, stay 5 years | Renting ahead by $13,482 |
| Staying 20 years | Same, stay 20 years | Buying ahead by $180,091 |
| Cheaper rent | Same home, $1,800 rent, stay 10 years | Renting ahead by $85,202 · buying doesn't catch up within 40 years |
| Flat home prices | Defaults with 0% home value growth, stay 10 years | Renting ahead by $85,990 · breakeven year 21 |
Illustrative examples, not projections. Figures use the tax year shown and the assumptions above.
Is It Better to Rent or Buy?
It depends mostly on how long you stay. Buying has big one-time costs: closing costs when you buy and agent commissions and fees when you sell [2]. Those take years of equity and price growth to earn back. Rent has no such costs, so short stays usually favour renting, and long stays usually favour buying.
The other big levers are the rent compared with the price, how fast home values grow, and what your down payment could earn if invested instead. Change one at a time to see which matters most for you.
What Costs of Owning Do People Forget?
Beyond the mortgage: property tax, homeowners insurance, HOA dues and upkeep. A common rule of thumb budgets 1% of the home's value a year for maintenance; it's a rough guide, and older homes often need more. With less than 20% down, most conventional loans add private mortgage insurance (PMI), which this calculator leaves out [3].
Your Loan Estimate lists the real closing costs for a specific loan [4]. A HUD-approved housing counselor can walk through the numbers with you for free or at low cost [5][6].
Does This Include Taxes?
No. It leaves out the mortgage interest deduction, which helps only if you itemize, and taxes on gains. When you sell a main home, you may be able to exclude up to $250,000 of gain, or $500,000 if married filing jointly, if you meet the ownership and use tests [7].
Frequently Asked Questions
How many years do you need to stay for buying to beat renting?
It varies. With a $400,000 home, 20% down, a 6.5% rate, $2,400 rent and 3% growth, buying pulls ahead in year 8. Cheaper rent or flat home prices push the breakeven out by many years.
Is renting throwing money away?
No. Rent buys housing, just as mortgage interest, property tax and upkeep do. The renter can also invest the down payment. Whether buying wins depends on how long you stay and how the numbers compare.
What are typical closing costs?
They vary by loan and by state. Your Loan Estimate and Closing Disclosure list them [2][4]. This calculator starts at 3% of the price to buy and 6% to sell, as rough rules of thumb you can change.
Should I count home appreciation?
It's one of the biggest swings in the result, and no one knows future prices. Try a few rates, including 0%, to see how much your answer depends on it.
Sources
- Buying a House: tools and resources for homebuyers — Consumer Financial Protection Bureau
- What fees or charges are paid when closing on a mortgage and who pays them? — Consumer Financial Protection Bureau
- What is private mortgage insurance? — Consumer Financial Protection Bureau
- Your home loan toolkit — Consumer Financial Protection Bureau
- Buying a Home — U.S. Department of Housing and Urban Development
- Find a Housing Counselor — U.S. Department of Housing and Urban Development
- Topic no. 701, Sale of your home — Internal Revenue Service
Official sources only: the IRS, SSA, BLS and other government agencies. Read how Zentavos researches.