Rent vs. Buy Calculator
Long-term housing decision model
Compare the complete renting and buying scenarios
Result
Calculation summary
Enter values to see the result
Live scenario preview
Estimated wealth under renting and buying
- Estimated outcome
- Renting leads in this scenario
- Estimated buy-scenario wealth
- $235,751.88
- Estimated rent-scenario wealth
- $251,246.03
What this comparison includes
- Mortgage principal builds equity through the declining loan balance.
- Taxes, insurance, maintenance, HOA dues, and mortgage insurance are included explicitly.
- The lower-cost scenario invests each upfront and monthly difference.
- Future home value is reduced by selling costs and the remaining mortgage.
How to use this calculator
- 1Choose a comparison period and enter the current rent, expected rent increase, insurance, deposit, and nonrefundable rental fees.
- 2Enter the home price, down payment, mortgage rate and term, transaction costs, and recurring ownership costs.
- 3Set transparent home-appreciation and investment-return assumptions, then compare estimated wealth under both scenarios.
Formula
Estimated advantage = absolute difference between buy-scenario wealth and rent-scenario wealth
Buy wealth combines estimated net sale proceeds with any invested monthly savings. Rent wealth combines the returned deposit with invested upfront and monthly cash-flow savings.
Calculation steps
- Calculate the fixed mortgage payment and amortize principal and interest each month.
- Add property tax, homeowners insurance, maintenance, HOA dues, and mortgage insurance to monthly ownership outlay.
- Increase rent and home value with the entered annual assumptions converted to equivalent monthly rates.
- Invest the upfront and monthly cash-flow difference for whichever scenario costs less in that period.
- At the comparison date, deduct selling costs and the mortgage balance from estimated home value, then compare scenario wealth.
Worked example
For a 400,000 home with 20% down, 6.25% financing, 2,000 monthly rent, and a ten-year horizon, the result reflects not only rent and mortgage payments but also closing costs, ownership expenses, home equity, sale costs, and invested cash-flow differences.
Assumptions
- The mortgage uses one fixed rate and monthly payments with no refinancing or extra principal.
- Property tax, homeowners insurance, and maintenance are modeled as percentages of the estimated home value; entered HOA and mortgage-insurance amounts stay fixed.
- The lower-cost scenario invests each upfront or monthly difference at the entered constant return; taxes and investment fees are excluded.
- The security deposit is returned in full without interest; nonrefundable rental fees are not returned.
- Income taxes, deductions, utilities, moving costs, renovations, and differences in home quality are excluded.
Sources
Frequently asked questions
Why does the calculator invest the cost difference?
A down payment, closing costs, or lower monthly housing costs could otherwise remain available for saving or investing. Modeling that alternative avoids treating tied-up cash as free.
Is mortgage principal counted as a cost?
It is part of monthly cash outlay, but principal reduces the remaining loan and therefore increases estimated sale proceeds. It is not lost like interest or maintenance.
Does the result include tax deductions?
No. Tax eligibility and value depend on jurisdiction and personal circumstances, so the calculator excludes income-tax effects.
Does a result favoring buying mean I should buy?
No. This is a scenario estimate, not financial advice or a prediction. Flexibility, risk, home condition, location, financing approval, and personal plans also matter.
Why are selling costs included?
The comparison converts the home into estimated cash at the selected horizon. Selling costs can materially reduce the equity available at that time.
What if I plan to stay longer than the mortgage term?
After the modeled mortgage is paid off, principal and interest stop while property tax, insurance, maintenance, HOA, and mortgage-insurance inputs continue.