How the rent vs buy comparison works
Comparing a mortgage payment with rent isn't enough. Owners also pay property taxes, insurance, maintenance and eventually selling costs, while renters can invest the down payment. This calculator simulates both paths month by month:
- Buyer: pays the down payment and closing costs, then the mortgage, tax, insurance, maintenance and HOA each month. Their home appreciates, and at the end they sell and pay selling costs.
- Renter: invests the money the buyer spent on the down payment and closing costs, pays rent and renter's insurance, and invests the difference whenever renting is cheaper than owning that month.
- If owning becomes cheaper than renting (rent rises while the mortgage stays fixed), the buyer invests the difference instead.
The result compares each person's net worth at the end: home equity after selling costs plus investments for the buyer, investments for the renter.
What usually decides it
- Time: buying has large one-time costs (closing and selling costs can total 8% to 10% of the price). The longer you stay, the more those costs are spread out. Under 3 to 5 years, renting usually wins.
- Price-to-rent ratio: divide the home price by a year of rent for a similar home. Above about 20, renting tends to be cheaper; below 15, buying tends to win.
- Appreciation vs investment returns: buying is a leveraged bet on local home prices. Renting is a bet that you'll actually invest the difference.
- Mortgage rate: higher rates raise the interest share of each payment, which is pure cost.
Things this calculator leaves out
To keep the comparison transparent it doesn't model the mortgage interest deduction (most households now take the standard deduction), capital gains taxes on investments or the home (the home sale exclusion is $250,000 single, $500,000 married), PMI, or the non-financial value of stability and control over your home.
Frequently asked questions
Is it cheaper to rent or buy right now?
It depends on local prices, rents and how long you'll stay. With mortgage rates near 6% to 7%, renting is often cheaper in high-cost cities for stays under 5 to 7 years, while buying can win sooner in lower-cost markets.
What is the breakeven year?
It's the first year in which the buyer's net worth, after paying selling costs, is higher than the renter's. If you plan to stay longer than the breakeven, buying comes out ahead under your assumptions.
Why does the renter invest the down payment?
To compare fairly, both people start with the same cash. The buyer puts it into the house; the renter puts it into investments.
What investment return should I use?
Many people use 5% to 7% for a diversified stock portfolio after inflation-adjusting expectations, or a lower number if the money would sit in savings.
Last reviewed: 2026-10-09