Rent vs Buy Calculator

It depends on your timeline, location, and opportunity cost. Buying includes mortgage, property tax, maintenance, and insurance; renting avoids those but rent typically rises 3–5% yearly. For most scenarios the break-even point (when buying becomes cheaper in net cost) falls between years 4 and 8. If you plan to move sooner, renting is often cheaper. Use this calculator with your numbers to compare total cost over your planned horizon.

The break-even year is when the net cost of buying (total spent minus home equity) drops below the net cost of renting (total rent minus investment gains on your down payment). The calculator factors in mortgage payments, property tax (e.g. 0.5–2.5% of value), maintenance (e.g. 1%), insurance, closing costs, home appreciation, rent increases, and a 7% investment return on the down payment. Enter your assumptions to see your break-even year.

If you invest the down payment at a 7% average return instead of buying, that opportunity cost is built into the rent-vs-buy comparison. In high-appreciation markets or with a long stay, buying often wins; in low-appreciation areas or if you move in a few years, renting and investing the difference can come out ahead. Run both scenarios in the calculator with your home price, rent, and investment return assumption.

Rent typically increases 3–5% per year, so the cost of renting grows over time. A fixed-rate mortgage payment stays constant, which makes buying relatively more attractive the longer you stay. The calculator uses an annual rent increase rate you specify; higher rent growth makes buying look better sooner. Try different rates to see how sensitive the break-even point is.

Usually between years 4 and 8, depending on down payment, mortgage rate, property tax, maintenance, rent level, rent growth, and investment return on the down payment. The calculator shows a year-by-year comparison and identifies the break-even year when the net cost of buying falls below renting. If you plan to move before that year, renting is often the cheaper option.

With a $450,000 home, 20% down, and a 6.5% mortgage, renting is often cheaper over a 5-year horizon once closing and selling costs are included. Transaction costs alone can be 7% to 10% of home value, or about $31,500 to $45,000. Buying tends to improve when you stay long enough to spread those costs over more years.

A common break-even range is 7 to 12 years for buyers with 6% to 7% mortgage rates and 3% home appreciation assumptions. For example, on a $400,000 home with 20% down and $2,100 rent alternative, break-even might occur near year 9. Faster rent growth and stronger appreciation can move break-even earlier.

At 6.5% with 20% down, principal and interest on $400,000 is about $2,530 per month before taxes and insurance. Adding 1.2% property tax and $1,500 annual insurance brings total housing cost near $3,160 per month. Using a 28% front-end ratio, that implies about $135,000 annual gross income.

A larger down payment lowers mortgage interest, but it also increases opportunity cost if that cash could earn returns elsewhere. For instance, an extra $50,000 invested at 7% grows to about $98,400 in 10 years. You should compare reduced mortgage cost against the foregone investment growth using the same timeframe.

Buying usually makes sense when you plan to stay 7+ years, can afford the down payment without sacrificing emergency savings, and when local rent growth outpaces home appreciation assumptions. The break-even year depends on mortgage rate, rent level, property tax, and investment return on your down payment.