Rent vs Buy Calculator

Owning a home costs money every month even after the mortgage is paid off — property tax, homeowners insurance, maintenance, and (for condos) HOA dues never go away. A reasonable rule of thumb is that 1–2% of the home's value per year goes to maintenance and major repairs (roof, HVAC, water heater, appliances), spread over the long run.

Buying also has large transaction costs you only pay when you move: roughly 2–5% of the price to buy (closing costs, inspections, lender fees) and 6–10% of the price to sell (agent commissions, transfer taxes, prep, concessions). Those round-trip costs typically take 3–5 years of price appreciation just to break even.

Renting buys you flexibility. The cost of an unexpected job change, a divorce, a layoff, or a bad neighbor is a lease termination and a moving truck — not a forced sale into a soft market with five-figure transaction costs.

Divide the home's purchase price by 12 times the annual rent for a comparable property. A ratio under 15 leans toward buying being cheaper. 15–20 is roughly neutral and depends heavily on how long you'll stay. Over 20 leans toward renting being cheaper, often by a lot.

Coastal US metros (San Francisco, Los Angeles, Seattle, New York, Boston) routinely sit at 25–40, which means renting is the lower-cost option for most timelines. Sun Belt and Midwest cities (Indianapolis, Pittsburgh, Cleveland, Memphis) often sit at 10–15, where buying pencils out quickly even on a 5-year horizon.

The ratio doesn't capture everything — schools, commute, the option value of locking in housing costs against future rent increases, and the discipline of forced savings via principal payments all matter — but it's a fast filter before running the full calculation.

If you'll stay less than 3 years, renting almost always wins on pure cash. The transaction costs of buying and selling outweigh any equity built and any appreciation captured. 3–7 years is a real toss-up that depends on the local price-to-rent ratio, mortgage rate, and rent growth.

Past 7 years, the math typically tilts toward buying — assuming the home is appropriate for your needs that whole time. The forced-savings effect of principal paydown plus modest appreciation usually beats the alternative of renting and investing the difference, especially because most renters don't actually invest the difference.

Don't ignore the opportunity cost of the down payment. Twenty percent down on a $400,000 home is $80,000 sitting in housing equity earning the local appreciation rate. The same $80,000 in a diversified portfolio at 6–7% real returns is a meaningful comparison that a calculator can make explicit.

Renting at $2,400/month with 3% annual increases: total rent paid over 7 years is about $221,800. Assume nothing comes back at the end — that's the cost of housing in the rent column.

Buying at $450,000 with 20% down ($90,000), 7% mortgage for 30 years: principal + interest is about $2,395/month. Add ~1.1% property tax ($413/mo), insurance ($125/mo), 1.5% annual maintenance ($562/mo), no HOA. All-in monthly cost: about $3,495 — over 7 years that's $293,580 in housing payments.

But you've also paid down about $31,800 of principal, the home has appreciated at ~3%/year to about $553,500, and selling costs (~7%) eat $38,750. Net equity walked away with: $553,500 − ($360,000 − $31,800) − $38,750 ≈ $186,550. Net cost of buying: $293,580 − $186,550 = $107,030, plus the $90,000 down payment in opportunity cost (which at a 6% real return would have grown to ~$135,000 in a brokerage account, a $45,000 opportunity gap).

Bottom line: buying costs roughly $152,000 net over 7 years vs $221,800 for renting — buying wins by about $70,000 in this scenario. Shorten the horizon to 3 years and the math flips: round-trip transaction costs swamp principal paydown, and renting wins by $25K+.