Rent vs Buy Calculator
Compare the true financial cost of renting versus buying a home. Get a comprehensive analysis including opportunity costs, tax benefits, and break-even calculations.
How to Use This Calculator
- Enter purchase details: Input the home price, down payment, mortgage rate, and associated costs like property taxes and insurance.
- Add rental information: Enter your current or expected rent, annual rent increase rate, and renter's insurance.
- Set your timeframe: Choose how long you plan to stay (5, 7, 10 years or more).
- Review the analysis: Compare total costs, net worth impact, and see your break-even point.
Purchase Details
Rental Details
Analysis Settings
Return if down payment invested instead
For mortgage interest deduction
Analysis Results
Total Cost Comparison
Net Worth Impact
Break-even Analysis
Key Factors
Year-by-Year Analysis
| Year | Buying Cost | Renting Cost | Home Value | Mortgage Balance | Net Worth Diff |
|---|
Factors Favoring Buying
- • Stable housing for 5+ years
- • Building equity and wealth
- • Tax benefits (mortgage interest deduction)
- • Protection against rent increases
- • Freedom to modify and personalize
- • Forced savings through principal payments
Factors Favoring Renting
- • Greater flexibility and mobility
- • No maintenance or repair costs
- • Lower upfront costs
- • Investment opportunity with down payment
- • No property tax or insurance
- • Predictable monthly expenses
Understanding the Rent vs Buy Decision
The decision to rent or buy a home is one of the most significant financial choices you'll make. While homeownership has traditionally been viewed as a cornerstone of the American Dream, the financial reality is more nuanced and depends heavily on your personal circumstances.
Key Factors to Consider
Time horizon: The longer you plan to stay in one place, the more buying tends to make sense. Transaction costs (closing costs when buying, realtor fees when selling) typically require 5-7 years to recoup through appreciation and equity building.
Local market conditions: In some cities, sky-high home prices make renting more economical even for long-term residents. In others, low property prices relative to rents make buying clearly advantageous.
Opportunity cost: Money used for a down payment could potentially be invested elsewhere. If the stock market returns 7-10% annually while your local real estate appreciates at 3%, renting and investing might build more wealth—but this varies significantly by market and time period.
Hidden Costs of Homeownership
Many first-time buyers underestimate the true cost of owning a home. Beyond your mortgage payment, expect to budget for: property taxes (varies by location, often 1-2% of home value), homeowners insurance, maintenance and repairs (budget 1% of home value annually), potential HOA fees, and larger utility bills for a typically bigger space.
Frequently Asked Questions
Should I rent or buy a home in 2025?
The decision to rent or buy depends on several factors including your financial situation, how long you plan to stay, local real estate market conditions, and current mortgage rates. With mortgage rates in 2025, many buyers find that staying for at least 5-7 years makes buying more financially advantageous. Use our rent vs buy calculator above to compare the total costs over your expected timeframe with your specific numbers.
How long do I need to own a home to make buying worth it?
Generally, you need to own a home for 5-7 years to break even on buying costs like closing costs (typically 2-5% of loan), real estate commissions when selling (5-6%), and other transaction fees. The break-even point varies based on home appreciation rates, mortgage interest rates, and local market conditions. Our calculator shows your specific break-even point based on your inputs.
What costs are included in a rent vs buy comparison?
A comprehensive comparison includes:
Buying costs: Mortgage payments (principal and interest), property taxes, homeowners insurance, HOA fees, maintenance and repairs (typically 1% of home value annually), closing costs, and the opportunity cost of your down payment.
Renting costs: Monthly rent, annual rent increases, renters insurance, security deposit, and moving costs. Our calculator factors in all these costs plus tax benefits and potential investment returns.
What is the 5% rule for rent vs buy?
The 5% rule is a quick way to compare renting vs buying: multiply the home's value by 5% and divide by 12 to get the monthly break-even rent. If your rent is below this number, renting may be more economical. For example, for a $450,000 home: $450,000 × 5% ÷ 12 = $1,875/month. However, this is a simplified rule—use our detailed calculator for a more accurate analysis.
How does home appreciation affect the rent vs buy decision?
Home appreciation significantly impacts the buy vs rent calculation. Historically, US home prices have appreciated about 3-4% annually, though this varies greatly by location. Higher appreciation rates favor buying as you build equity faster. However, if you rent and invest your down payment instead, stock market returns (historically ~7-10% annually) might outpace real estate in some scenarios. Our calculator lets you adjust both appreciation and investment return rates.