Rent vs. buy calculator
Compare the long-run cost of renting and owning.
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How it's calculated
Buying is costed as everything you pay over your stay: mortgage payments, property tax, insurance, maintenance, 3% of the price to buy and 6% of the sale value to sell, plus the return your down payment would have earned had you invested it instead. From that comes off the equity you walk away with, the grown home value less the mortgage balance that is left. Renting is the rent over the same years, rising at its yearly increase. The difference is the answer for your stay; the longer it is, the more buying tends to win, because the one-off transaction costs are spread thinner and equity has time to build.
How long do I need to stay for buying to make sense?
Usually five to seven years with typical numbers: it takes that long for equity growth to cover the roughly 9% of the price spent buying and selling. Enter your own rent and price; in expensive cities with low rents relative to prices the break-even can be ten years or more, and in cheaper markets three or four.
What is the price-to-rent ratio?
The home price divided by a year of rent for a comparable place. Below about 15, buying usually wins quickly; above 20, renting and investing the difference often wins unless you stay a long time. The default here is 400,000 ÷ 26,400 ≈ 15.
What does this leave out?
The mortgage interest deduction, which helps only if you itemize; rent for a smaller place than you would buy; the chance you refinance; and the fact that a mortgage payment is fixed while rent keeps rising after year seven. It also assumes you actually invest the down payment when renting, which most people do not.
Results are estimates for informational purposes only and are not financial, medical or legal advice.