Rent vs Buy Calculator

How it works

Year by year, for as long as you say you will stay:

• Renting = 12 × rent (rising by your percentage each year) + renter's insurance, added up.
• Cash paid to own = down payment + closing costs at the start, then each year the mortgage payments, property tax and maintenance on that year's home value, insurance and HOA dues.
• What you get back when you sell at the end of the period = home value after appreciation − selling costs − the remaining loan balance. Home equity is value minus balance, before selling costs.
• Opportunity cost = what the down payment and closing costs would have grown to at your investment return, minus the original amount. A renter keeps that cash working.
• Net cost of buying = cash paid − sale proceeds + opportunity cost. Written another way it is interest + tax + insurance + maintenance + HOA + closing and selling costs + opportunity cost − appreciation, because the principal you repay comes back to you at the sale.

The break-even year is the first year in which the cumulative net cost of buying is no more than the cumulative cost of renting. Transaction costs make the first years expensive for an owner, which is why a short stay usually favors renting and a long one favors buying.

Worked example

Rent of $1,800 rising 3% a year plus $200 of insurance costs $115,677 over five years. Buying a $350,000 home with 20% down at 6.5%: $80,500 goes in at closing, five years of payments, tax, insurance and maintenance add $156,068, and selling at $405,746 after 3% yearly appreciation returns $119,290 once the 6% selling costs and the $262,111 balance are paid. Add $22,241 of lost return on the $80,500 and the net cost of buying is $139,518, so renting comes out $23,841 ahead over five years, with equity of $143,635 at the end. Stay ten years on the same assumptions and buying pulls ahead by about $4,600; at 5% appreciation buying is ahead by year four.