DeluxeCalc

Rent vs Buy Calculator

Is buying a house better than renting?

About this calculator

Buying a home builds equity and protects you from rent increases, but it also ties up a large down payment, adds closing and selling costs, and brings property tax, insurance and upkeep. Renting keeps that cash free to invest. Whether buying or renting leaves you wealthier depends on how long you stay, how fast home prices and rents rise, and what your savings would earn. This calculator follows both paths month by month with the same money and compares the net worth of a buyer and a renter at the end of your stay.

How to use this calculator

Enter the Home Price, your Down Payment as a percentage of the price, the Mortgage Rate and the Loan Term. Set the Home Appreciation you expect each year. Enter the Monthly Rent for a comparable home and the yearly Rent Increase. The Investment Return is what money not spent on housing would earn, and Years You Plan to Stay is when the comparison ends, as if the home were sold then. Under Advanced assumptions you can change closing costs, property tax, home insurance, maintenance, HOA dues, selling costs, the PMI rate and renters insurance. Every input is saved in the page address, so a link reproduces your scenario.

The method

On day one the buyer pays the down payment and closing costs, and the renter invests the same amount instead. Each month the calculator adds up the buyer's costs: the mortgage payment, PMI while the loan is above 80% of the price, property tax, insurance, maintenance and HOA dues. The renter pays rent plus renters insurance. Whoever pays less that month invests the difference, so both households spend exactly the same amount and only what they own differs. This works in both directions: early on owning usually costs more and the renter invests the gap; later, as rent rises or the loan is paid off, renting may cost more and the buyer invests the gap. Property tax, maintenance, insurance and HOA dues rise with the home's value each year; rent and renters insurance rise with the rent increase. Investments grow monthly at the investment return. At the end, the buyer's net worth is the home's value minus selling costs and the remaining loan, plus the buyer's investments. The renter's net worth is the renter's portfolio. The break-even year is the first year from which buying stays ahead through the end of your stay.

Worked example using the default values

A $400,000 home with 20% down needs $92,000 upfront: $80,000 down and $12,000 of closing costs. The $320,000 loan at 6.25% over 30 years costs $1,970 a month in principal and interest, and with property tax, insurance and maintenance the first month of owning costs $2,870. Renting a comparable home costs $2,215 a month with renters insurance, so the renter invests the $92,000 upfront plus the monthly difference. After 10 years at 3.5% appreciation, the home is worth $564,240; after 6% selling costs and the $269,561 loan balance, the buyer's net worth is $260,824. The renter's portfolio, growing at 7%, is worth $272,974, so renting comes out ahead by $12,149, and buying does not break even within 10 years. Stay 15 years and buying pulls ahead by $454; at a 5% investment return instead of 7%, buying wins after 10 years by $31,239 and breaks even in year 7.

Interpreting the results

The headline names the choice with the higher net worth at the end of your stay and the size of the gap. The break-even year matters most if you are unsure how long you will stay: buying usually needs several years to recover the closing and selling costs. The chart shows both net worths year by year; where the lines cross is where buying starts to win. The yearly table shows what each household pays, so you can see when the monthly costs of owning and renting cross. If the gap is small compared with the uncertainty in appreciation and returns, treat the result as a tie and decide on other grounds, such as stability, flexibility or the freedom to change the home.

Practical tips

Test a few scenarios rather than relying on one. Lower the appreciation to 2% and the return to 5% to see a cautious case, and change the years to see how the answer depends on how long you stay. Use the real rent for a comparable home, not your current rent if the homes differ. Check the local property tax rate, which varies widely by state and county, and get an insurance quote, since premiums have risen sharply in some regions. The comparison assumes the renter actually invests the savings; if that money would be spent instead, buying works as forced saving and comes out further ahead.

Limitations

Returns, appreciation and rent growth are constant here, while real ones vary from year to year. The calculator ignores income taxes: it does not include the mortgage interest deduction, tax on the renter's investment gains, or the federal exclusion of up to $250,000 of home sale gain ($500,000 for married couples filing jointly) that usually leaves the buyer's gain untaxed. Property tax and insurance are simplified to grow with the home's value, and the mortgage rate is fixed. Results are estimates for planning, not financial advice.

Frequently Asked Questions

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