Rent vs Buy Calculator
Renting isn’t “throwing money away,” and buying isn’t automatically building wealth. This calculator compares both over the years you’ll actually stay — including the return your down payment could earn if you invested it — and tells you the year buying pulls ahead.
Your situation
Compare a home you’d buy with a similar place you’d rent. New to this? The defaults are realistic — just change the price, the rent and how long you’ll stay.
Your wealth: buying vs renting
Net wealth each year on both paths. Where the lines cross is your breakeven point.
Year by year
| Year | If you buy | If you rent | Ahead |
|---|
How the rent vs buy decision really works
The popular wisdom — “renting is throwing money away” — is wrong, or at least incomplete. Renting buys you a place to live and keeps your savings liquid and invested. Buying buys you a place to live and slowly converts your payments into equity, but it ties up a big chunk of cash and comes with costs renters never see: property tax, maintenance, insurance, and the 3%-to-buy, 6%-to-sell transaction costs that bookend ownership.
A fair comparison has to do two things most rules of thumb skip. First, it has to give the renter credit for investing the down payment instead of sinking it into a house. Second, it has to look at the full time horizon, because the upfront costs of buying only pay off if you stay long enough to spread them out. This calculator does both: it runs your money month by month down each path and compares where you end up.
The single most important input
How long you’ll stay. Buy and sell within three or four years and the transaction costs alone can wipe out any equity gains — renting almost always wins. Stay ten years and buying usually pulls comfortably ahead. The breakeven year is where the two paths meet, and it’s the honest answer to “should I rent or buy.”
How we calculate it
Both paths start on equal footing and “spend” the same amount on housing each month. Whichever path costs less that month invests the surplus at your expected return, so neither side gets a free pass. We then compare the wealth each path leaves you with:
Renter’s wealth = down payment + closing costs + monthly savings, all invested and grown
Worked example: On a $400,000 home with 20% down at 6.5% versus $2,500 rent, staying 7 years, buying ends up roughly $11,000 ahead — and breaks even around year 6. Drop the rent to about $2,400 and the two are a wash; below that, renting and investing the difference comes out ahead.
What tips the answer
- Years you’ll stay. The biggest lever by far — longer favors buying.
- Rent vs price. Cheap rent relative to the home price favors renting; the calculator’s “renting wins below” figure is exactly that tipping point.
- Investment return. The higher the return on invested cash, the better renting looks, because the renter’s down payment works harder.
- Home appreciation. Faster-rising home values favor buying — but it’s historically a smaller effect than people assume.
- Mortgage rate. A higher rate makes buying more expensive each month and pushes the breakeven year out.
Glossary
- Breakeven year
- The year your wealth from buying catches up to your wealth from renting and investing the difference.
- Opportunity cost
- The return your down payment and closing costs could have earned if invested instead of spent on a home.
- Price-to-rent ratio
- Home price divided by a year’s rent. Higher ratios (pricey homes, cheap rent) tend to favor renting.
- Transaction costs
- The one-time costs of buying (~2–4%) and selling (~6%) a home that buying has to overcome to pay off.
Frequently asked questions
Is it better to rent or buy a home?
It depends mostly on how long you’ll stay. Buying carries large upfront and selling costs that take years to earn back, so a short stay usually favors renting and a long stay favors buying. This calculator finds your breakeven year — the point where buying overtakes renting once you account for the down payment you could have invested instead.
What is the breakeven point for buying vs renting?
It’s the year your wealth from buying — home equity after selling costs, plus any side investments — catches up to the wealth you’d have from renting and investing the difference. Before that year renting leaves you richer; after it, buying does. With typical assumptions it often lands between years 4 and 8.
Why does the down payment count as a cost of buying?
Because that money has an opportunity cost. If you rent instead of buy, your down payment and closing costs stay invested and grow. A fair comparison gives the renter credit for those investment returns — which is why simple “mortgage vs rent” comparisons overstate the case for buying.
Does buying always build wealth?
No. Buying builds equity, but if you sell within a few years the transaction costs (roughly 3% to buy and 6% to sell) plus the lost investment returns on your down payment can leave you worse off than renting. Buying tends to win only once you stay long enough to spread those costs out — which is what the breakeven year tells you.
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