Rent vs Buy Calculator
Free rent vs buy calculator: compare unrecoverable buying costs vs rent, find your break-even year, and check the price-to-rent ratio.
The argument you’ve heard a thousand times
“Rent is throwing money away.” “Buying is a trap, you’re just paying the bank instead of a landlord.” Everyone has an uncle with a strong opinion and a spreadsheet he’s never actually built. The truth is annoyingly conditional: is it better to rent or buy a house depends on the price, the rent, the mortgage rate, and above all how long you stay. Get those wrong and either choice can cost you six figures. The calculator above runs your actual numbers instead of your uncle’s vibes.
The monthly comparison nobody shows you
Take a $400,000 house. You put 20% down ($80,000) and borrow $320,000 at 6.75% for 30 years. The monthly principal and interest comes to about $2,076. A comparable rental nearby costs $2,200 a month. Buying looks cheaper, right? Not so fast.
In the first month, $1,800 of that $2,076 payment is interest. Only $276 reduces your loan balance. Now add the rest of the ownership stack: property tax at 1.1% a year ($367 a month), homeowners insurance (about $150), and maintenance at roughly 1% of the home’s value a year ($333). Your true monthly outlay is around $2,926, and the portion you’ll never see again, the interest, tax, insurance, and maintenance, is about $2,650. That’s $450 more than rent, every single month, in year one. The $276 of principal you “saved” is the only part working for you.
This is the reframe that changes the whole debate. Rent isn’t uniquely “thrown away.” Mortgage interest, property tax, insurance, and maintenance are thrown away too. The honest question is never “rent vs mortgage payment.” It’s unrecoverable buying costs vs rent.
The costs of buying you never get back
Write these on a sticky note before you fall in love with a kitchen:
- Day-one cash: down payment plus closing costs (typically 2 to 5% of the price). On our example that’s $80,000 plus roughly $8,000 to $12,000, gone from your investment account on day one.
- Mortgage interest: the largest unrecoverable cost, especially in the early years when payments are mostly interest.
- Property tax and insurance: forever costs, and they rise over time.
- Maintenance: the 1%-a-year rule is a long-run average. Some years it’s zero. Then the roof goes.
- HOA dues, if any, which also rise.
- Selling costs: around 6% of the sale price when you eventually move, agent commissions and fees.
- Opportunity cost: the big invisible one. That $90,000 of day-one cash, invested at a reasonable return instead, compounds for decades. The calculator counts it. Most back-of-napkin math doesn’t. The compound interest calculator isolates that number on its own, so you can see exactly what the parked down payment would become if you never bought at all.
The break-even year: how long you need to stay
Buying starts deeply in the hole: tens of thousands in closing and selling friction, plus years of interest-heavy payments. Each year you stay, two things work in your favor: you build equity as payments shift toward principal, and (usually) the home appreciates while your mortgage payment stays fixed and rents rise around you. The break-even year is when those forces finally outweigh the renter’s head start.
As a rule of thumb, buying needs five to seven years before the purchase and sale costs are recovered. Under that, renting usually wins. Well over it, buying usually wins. But the range is wide: at low rates with strong appreciation it can be three years; at high rates with flat prices it can be fifteen or never. That’s exactly what the calculator above computes for your inputs instead of a rule of thumb. Punch in your price, rent, rate, and expected stay, and read the year it flips.
The 30-second screen: price-to-rent ratio
Before running the full model, divide the home’s price by the annual rent for a comparable property. That’s the price-to-rent ratio, and it’s a decent quick screen:
- Under 15: buying is usually clearly cheaper.
- 15 to 20: genuinely close, run the full calculator.
- Over 20: renting is usually cheaper for anything short of a very long stay.
Our example: $400,000 ÷ ($2,200 × 12) = 15.2. Right on the borderline, which is why the detailed math matters here. A $400,000 house renting for $1,500 a month gives a ratio of 22, and renting almost certainly wins unless you stay put for a very long time.
Rent vs buy by city changes everything
National averages are nearly useless for this decision because the ratio is local. Coastal metros like New York, San Francisco, and Los Angeles routinely sit at price-to-rent ratios above 25, which is why renting can be the better financial choice there even for people who could easily afford to buy. A buyer in Manhattan might need a decade or more to break even. Meanwhile, many Midwest and Southern markets sit under 15, where buying wins in just a few years. When you see a rent vs buy calculator by city, that’s what it’s capturing: the same $400,000 house is a different financial proposition in Pittsburgh than in San Diego. Always run your local numbers, not national ones.
What the calculator assumes
No model is better than its assumptions, so here are ours, all adjustable in the calculator: home price appreciation and rent growth (defaults are modest single-digit rates, hypothetical, not promises), investment return on the down payment you’d otherwise invest, your marginal tax treatment, and selling costs when you move. Change any of them and watch the break-even year move. If the answer flips on small assumption changes, treat the decision as close and let lifestyle factors decide.
The non-financial half of the decision
Money isn’t the whole story, and a calculator can’t measure the rest. Buying buys control: paint the walls, get the dog, no landlord selling out from under you. It also buys illiquidity and obligation: a roof, a furnace, and a lawn with your name on them, plus the friction of selling if life changes. Renting buys flexibility, which has real value in your twenties, during career changes, or in an unfamiliar city. There’s no shame in renting while you save a bigger down payment or wait for the right time. The worst outcome isn’t renting or buying. It’s buying before you’re ready because someone told you rent is dead money. The same honest math applies to the car in the driveway, by the way: if you’re carrying a loan on it while house-hunting, the auto loan calculator shows the true total cost of that loan, and clearing it is often the fastest way to build the down payment you’re missing.
Rent vs buy FAQs
Is it better to rent or buy a house?
It depends on how long you’ll stay, local prices versus rents, and mortgage rates. Buying usually needs five to seven years to overcome purchase and selling costs. Under that horizon renting typically wins; well over it, buying typically wins. Run your own numbers above rather than trusting a rule of thumb.
Is rent really throwing money away?
No more than the unrecoverable costs of owning. Mortgage interest, property tax, insurance, HOA dues, and maintenance never come back either. In the early years of a mortgage, those can easily exceed rent on a comparable home. Rent buys housing, just as interest buys the use of the bank’s money.
How long do I need to stay for buying to make sense?
Commonly five to seven years, though the calculator gives you the exact figure for your inputs. You pay roughly 2 to 5% to buy and about 6% to sell, so around a tenth of the price must be earned back through appreciation and equity before you’re level. High rates and slow appreciation push the break-even later.
What is a good price-to-rent ratio?
Divide the purchase price by a year’s rent on a comparable home. Under 15 generally favors buying, 15 to 20 is close enough to need the full calculation, and over 20 generally favors renting for short to medium stays. Coastal cities often sit above 25.
Does buying win once the mortgage is paid off?
Not automatically. If the renter invested the savings at a strong return, they can stay ahead even over 30 years in some scenarios. And most owners sell long before the loan is paid off: the typical seller moves after about a decade. The paid-off house is a great outcome, but it’s not guaranteed to beat disciplined investing.
Do I still get a tax break for owning?
Only if your itemized deductions exceed the standard deduction. Many homeowners with ordinary loans never clear it, so their tax benefit is genuinely zero. Mortgage interest also shrinks every year as the loan amortizes, so any benefit fades over time.
This calculator provides an educational estimate based on the numbers and assumptions you enter. It is not financial advice. Housing markets, tax law, and investment returns are uncertain; consult a qualified professional before buying.