Rent vs Buy Calculator

This calculator answers a question that looks simple but isn't: will you have more money five, ten, or twenty years from now if you rent or if you buy? It's not comparing your mortgage payment to your rent check. That comparison misses most of what matters. The real question is about net worth — the total value of everything you own minus what you owe.

When you buy, money flows into equity (the part of the house you actually own), but also into interest, taxes, insurance, and repairs. When you rent, you keep your down payment invested and avoid those ownership costs, but you build no housing equity. The calculator tracks both paths year by year, accounting for investment returns on your savings, home appreciation, and every cost on both sides. At the end, it tells you which choice leaves you richer and how long you'd need to stay for buying to make sense.

Financial planner Ben Felix popularized a quick rule: multiply the home price by 5%, divide by 12, and compare that number to your rent. If rent is lower, renting is probably cheaper. For a $400,000 home, that's $400,000 × 0.05 = $20,000 per year, or about $1,667 per month. If you can rent a similar place for $1,500, the math favors renting. The 5% approximates your annual ownership costs: roughly 3% opportunity cost on your equity, 1% for maintenance, and 1% for property taxes.

The break-even calculation goes deeper. It asks: given my down payment, closing costs, and all ongoing expenses, how many years until buying catches up to renting? If you put $80,000 down, pay $12,000 in closing costs, and your total ownership costs exceed rent by $400 per month, you need time for appreciation and equity building to overcome that gap. Typically, break-even falls somewhere between 3 and 7 years, depending heavily on local rent prices, appreciation rates, and mortgage terms.

Maria earns $85,000 a year and is deciding between renting a two-bedroom apartment for $1,800 per month or buying a $350,000 condo. She has $70,000 saved. If she buys, she'll put 20% down ($70,000), pay about $8,000 in closing costs, and take a 30-year mortgage at 6.5% interest. Her monthly mortgage payment comes to roughly $1,770, but add $290 for property taxes, $100 for insurance, and $150 for HOA fees, and she's at $2,310 total.

If Maria rents, she invests her $78,000 (the money she'd have spent on down payment and closing costs) in a diversified portfolio returning 7% annually. She also invests the $510 monthly difference between her rent and ownership costs. After 7 years, assuming 3% annual home appreciation and her investments performing as expected, she'd have roughly $145,000 in her investment account as a renter. As an owner, her home equity would be about $130,000. In this scenario, Maria breaks even around year 8. If she plans to move sooner, renting wins.

The calculator reveals insights you might not expect. First, it helps you negotiate rent. If you're considering a $500,000 home and the 5% rule suggests your ownership cost is $2,083 monthly, any rent below that amount is a financial win. You can use this number as your ceiling when apartment hunting, knowing exactly where the math shifts.

Second, the tool exposes whether a larger down payment actually helps you. Putting 30% down instead of 20% on that $350,000 condo means an extra $35,000 locked in housing equity earning the appreciation rate (maybe 3%) instead of invested in stocks (maybe 7%). The calculator shows whether that trade-off works in your favor. Sometimes a smaller down payment with private mortgage insurance still leaves you richer over time. Third, you can test extreme scenarios: what if home prices stay flat for a decade? What if rent increases 5% yearly? Running these cases reveals which assumptions your decision depends on most.

The most common error is comparing mortgage payment to rent and stopping there. A $1,600 mortgage looks cheaper than $1,900 rent until you add $400 in taxes, insurance, and maintenance. Always input the full monthly ownership cost, not just principal and interest. The calculator needs the complete picture to give you an honest answer.

Another mistake is assuming unrealistic appreciation. Plugging in 6% annual growth because your coworker's home doubled in value distorts everything. Nationally, homes have appreciated about 3-4% per year over the long term, barely above inflation. Unless you have strong local data suggesting otherwise, stay conservative. Finally, people forget to account for how they'd actually use the down payment money if they rented. Leaving it in a savings account earning 0.5% makes buying look better than it should. If you'd genuinely invest that cash in index funds, input a realistic 6-7% return. Your comparison should reflect your actual behavior, not a theoretical version of yourself.