🏠Rent vs Buy Calculator
Compare the costs of renting vs buying a home. Find out which option is better for your financial situation.
Buying Details
Renting Details
Economic Assumptions
How to Use This Rent vs Buy Calculator
Our rent vs buy calculator goes beyond a simple monthly cost comparison. It projects your net worth in both scenarios over time, accounting for all the hidden costs of ownership and the power of alternative investments.
What This Calculator Accounts For:
- Purchase costs (down payment, closing costs, fees)
- Monthly costs (mortgage, HOA, taxes, maintenance)
- Opportunity cost (down payment invested vs tied up)
- Home appreciation and rent inflation
- Selling costs (commission, taxes)
The 5% Rule (Price-to-Rent Ratio)
A quick way to evaluate whether renting or buying is better: multiply the home price by 5% and divide by 12. If rent is LOWER than that amount, renting is probably better. If it's HIGHER, buying may make sense.
Example:
$500,000 home × 5% ÷ 12 = $2,083/month. If you can rent an equivalent home for less than $2,083/month, renting is probably financially better.
Note: This is a simplified rule. The calculator above does a much more detailed analysis considering your specific situation.
Hidden Costs of Homeownership
"Rent is throwing money away" is a common myth. The truth is buying also has many costs that don't build equity:
Upfront Costs (3-7% of value)
- Stamp duty/transfer tax (1-4%)
- Closing costs and legal fees
- Appraisal and inspection
Recurring Costs
- Property tax (0.5-2%/year)
- Maintenance (1-2%/year)
- Home insurance
- HOA fees (if applicable)
On a 30-year mortgage, you may pay more in INTEREST than the original home value. In many cases, the disciplined renter who invests the difference ends up with MORE wealth than the homeowner.
When Buying Makes Sense
✓ Consider Buying If:
- You plan to stay 7+ years in the same location
- You can put 20% or more down
- Equivalent rent is high vs home price
- Interest rates are low
- Local market has good prospects
✓ Consider Renting If:
- You may need to relocate soon
- Price-to-rent ratio is very high
- Interest rates are high
- You don't have enough for a down payment
- You want flexibility and fewer responsibilities
Frequently Asked Questions
Why does the calculator say renting is better when everyone says to buy?
Conventional wisdom ignores opportunity cost - the money you could make by investing your down payment and monthly difference. In many markets, especially in major cities, the math favors renting. The outcome depends heavily on local prices, interest rates, and how long you plan to stay.
But rent doesn't build equity!
Correct, but the money you save renting CAN build equity - through investments. If you invest $100,000 down payment + $1,500/month difference at 8% annually for 20 years, you'll have over $1 million. Buying a home isn't the only way to build wealth.
What if home prices rise a lot?
The calculator lets you adjust the appreciation rate. But remember: historically, real estate appreciates about 3-5% annually (similar to inflation), while the stock market returns 7-10%. Also, when home prices rise, rents rise too - maintaining the ratio. Periods of exceptional appreciation are hard to predict and shouldn't be the basis for your decision.
Financial Accuracy
Disclaimer: This calculator provides estimates for informational purposes only. This is not financial, tax, or legal advice. Please consult a qualified financial advisor for advice specific to your situation.