Should you rent or buy a home? There is no single answer that works for everyone. The right choice depends on your home price, monthly rent, mortgage rate, down payment, property taxes, insurance, maintenance, closing costs, investment returns, and how long you expect to stay in the home.
Our free Rent vs. Buy Calculator helps you compare the estimated long-term cost of renting with the estimated financial cost of buying a home.
Instead of comparing rent with only a mortgage payment, this calculator considers several important costs, including property taxes, homeowners insurance, maintenance, HOA fees, PMI, closing costs, selling costs, rent increases, home appreciation, remaining mortgage balance, home equity, and the potential investment return on your down payment.
Rent vs. Buy Calculator
Enter your estimated numbers below. You can change the assumptions and compare different scenarios.
This assumption estimates what your down payment and initial buying costs might have earned if you had kept that money invested instead of using it to buy the home.
This calculator provides estimates for educational purposes only. Actual housing costs can vary based on your lender, location, mortgage terms, taxes, insurance, maintenance, HOA fees, closing costs, selling costs, investment performance and market conditions.
How Does the Rent vs. Buy Decision Work?
Renting and buying both have advantages and disadvantages. The better option depends on your financial situation, your expected length of stay, local housing costs, mortgage rates, and your long-term plans.
Renting generally requires less money upfront and can provide more flexibility. Buying can provide an opportunity to build home equity, but it also comes with additional costs and responsibilities.
A useful comparison should look beyond the monthly mortgage payment. Property taxes, homeowners insurance, maintenance, HOA fees, closing costs, selling costs and the opportunity cost of your down payment can all affect the result.
What Does the Rent vs. Buy Calculator Consider?
The calculator is designed to provide a broader comparison than a simple mortgage calculator.
- Home purchase price
- Down payment
- Mortgage interest rate
- Mortgage term
- Monthly rent
- Annual rent increases
- Property taxes
- Homeowners insurance
- Maintenance costs
- HOA fees
- PMI
- Buying closing costs
- Selling costs
- Expected home appreciation
- Length of ownership
- Potential investment return on upfront cash
Costs of Renting
Renting usually has a simpler cost structure than buying a home. Your largest housing expense is normally your monthly rent, although other expenses may apply depending on your rental agreement.
- Monthly rent
- Renter's insurance
- Utilities
- Parking
- Application or move-in fees
- Pet fees, when applicable
One potential advantage of renting is that major property repairs are often the landlord's responsibility, although responsibilities vary according to the lease and applicable local rules.
Costs of Buying a Home
Buying a home involves more than the mortgage payment. A homeowner may have several different costs throughout the ownership period.
- Mortgage principal and interest
- Property taxes
- Homeowners insurance
- Maintenance
- Repairs
- HOA fees
- Private mortgage insurance, when applicable
- Closing costs
- Down payment
- Selling costs
Why You Shouldn't Compare Rent With Only the Mortgage Payment
A common mistake is comparing a $2,000 monthly rent payment with a $2,000 mortgage payment and assuming that the two options cost the same.
Homeownership can involve property taxes, insurance, maintenance, HOA fees and other expenses that renters may not pay directly.
Renting vs. Buying: Quick Comparison
| Factor | Renting | Buying |
|---|---|---|
| Upfront cost | Usually lower | Usually higher |
| Monthly housing cost | Mostly rent | Mortgage plus ownership costs |
| Maintenance | Often handled by landlord | Owner responsibility |
| Flexibility | Generally higher | Generally lower |
| Home equity | No home equity | Potential to build equity |
| Property value risk | Generally not your risk | Owner bears market risk |
| Transaction costs | Generally lower | Buying and selling can involve significant costs |
When Renting May Make More Sense
1. You May Move Soon
If you expect to move within a relatively short period, renting may provide more flexibility. Buying and selling a property can involve significant transaction costs.
2. You Have Limited Savings
Buying generally requires cash for a down payment and closing costs. You may also want an emergency fund for unexpected expenses.
3. Buying Costs Much More Than Comparable Rent
If the estimated cost of owning a similar home is substantially higher than comparable rent, renting may be worth considering.
4. You Prefer Fewer Maintenance Responsibilities
Homeowners are responsible for repairs and maintenance. Renters may have fewer direct responsibilities for major property repairs.
5. You Value Flexibility
Renting can make it easier to move for a new job, change cities, or adjust your housing situation without selling a property.
When Buying May Make More Sense
1. You Plan to Stay for Many Years
A longer ownership period may give you more time to spread the transaction costs of purchasing a home over the years you live there.
2. You Can Comfortably Afford the Home
A home should fit within your overall budget. Consider your mortgage, taxes, insurance, maintenance, utilities, transportation costs and other debts.
3. You Have Enough Cash Reserves
A down payment is not the only financial consideration. Closing costs, moving expenses, repairs and emergency savings should also be considered.
4. You Want to Build Home Equity
Mortgage payments can reduce your loan balance over time. If the property retains or increases in value, this can contribute to your home equity.
5. You Want More Control Over Your Home
Homeownership can provide greater control over renovations, improvements and how you use the property, subject to applicable rules and restrictions.
What Is the Break-Even Point?
The break-even point is the approximate point at which buying becomes financially competitive with renting under a particular set of assumptions.
There is no universal break-even period. It depends on factors such as home price, rent, mortgage rates, property taxes, maintenance, closing costs, selling costs, home appreciation and investment returns.
For that reason, the calculator above estimates the comparison across multiple years instead of assuming that buying automatically becomes better after a specific number of years.
What Does "Net Buying Cost" Mean?
The calculator uses an estimated net buying cost to make the comparison easier to understand.
In simple terms, the calculation considers the money spent on purchasing and owning the home and then subtracts the estimated value you could retain through home equity after accounting for estimated selling costs.
This is an estimate rather than a prediction. Actual results depend on mortgage terms, property values, transaction costs, taxes, maintenance and many other factors.
Don't Forget the Opportunity Cost of Your Down Payment
A large down payment reduces the amount you borrow, but the money used for the down payment cannot simultaneously be used for other financial goals.
For example, if you put $80,000 toward a home, that $80,000 is no longer available for another investment.
The calculator therefore allows you to enter an estimated annual investment return. This is used to estimate what the upfront cash could potentially have become if it had remained invested.
What Can Change the Result?
Small changes in assumptions can produce very different rent-versus-buy results.
- Mortgage interest rates
- Monthly rent
- Annual rent increases
- Home price
- Down payment
- Property taxes
- Home insurance
- Maintenance costs
- HOA fees
- PMI
- Home appreciation
- Closing costs
- Selling costs
- Investment returns
- Length of ownership
Example Rent vs. Buy Scenario
Suppose you are considering a $400,000 home and have an $80,000 down payment. Your alternative is renting a similar property for $2,200 per month.
For example, you might assume a 6.5% mortgage rate, 1.2% annual property tax, $1,800 annual homeowners insurance, 1% annual maintenance, 3% annual rent growth and 3% annual home appreciation.
You could also use a 7% estimated investment return assumption to see how the opportunity cost of your upfront cash affects the comparison.
Enter those assumptions into the calculator above and then change individual numbers to see how the result changes.
Try Different Rent vs. Buy Scenarios
Don't rely on just one calculation. Try several scenarios.
- What happens if your rent is $2,500 per month?
- What happens if mortgage rates are higher?
- What happens if you stay for 10 years?
- What happens if home appreciation is lower?
- What happens if maintenance costs are higher?
- What happens if you make a larger down payment?
- What happens if the home has an HOA?
- What happens if your investment return assumption is different?
Frequently Asked Questions
Here are answers to common questions about renting, buying, and using the Rent vs. Buy Calculator.
Is buying always cheaper than renting?
No. Buying can be more expensive than renting depending on the home price, mortgage rate, property taxes, insurance, maintenance costs, transaction costs and length of ownership.
Should I compare rent with my mortgage payment?
Not by itself. A more complete comparison includes property taxes, homeowners insurance, maintenance, HOA fees, PMI and other ownership costs.
How long should I stay in a home before buying?
There is no universal number that applies to everyone. A longer ownership period can give you more time to spread transaction costs over the ownership period, but the right decision depends on your individual circumstances.
Does the calculator include home appreciation?
Yes. You can enter an estimated annual appreciation rate. The calculator uses that assumption to estimate a future home value. Actual home prices can rise or fall.
Does the calculator include closing costs?
Yes. You can enter estimated buying closing costs and selling costs. Actual costs vary by transaction and location.
Does the calculator include HOA fees?
Yes. You can enter an estimated monthly HOA fee if the property has one.
Does the calculator include PMI?
Yes. You can enter an estimated monthly PMI amount. PMI requirements and costs vary depending on the loan and borrower.
What is the opportunity cost of a down payment?
The opportunity cost is the potential return you give up by using money for a down payment instead of keeping it invested or using it for another financial goal.
Is the investment return guaranteed?
No. The investment return is only an assumption used to illustrate a possible alternative use of the upfront cash. Actual investment returns can vary and losses are possible.
Is this calculator financial advice?
No. It is an educational calculator that provides estimates based on the information entered by the user. It does not account for every possible cost or individual financial circumstance.
Rent vs. Buy: The Bottom Line
The question isn't simply whether buying is better than renting. The more useful question is which option makes sense for your financial situation, expected length of stay and long-term goals.
Use the calculator above to compare different scenarios rather than relying on one assumption. Consider the full cost of renting, the full cost of owning and the potential opportunity cost of your money before making a major housing decision.
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