Rent vs. Buy Calculator

How to use the rent vs. buy calculator

Enter home price, down payment percentage, mortgage rate, property tax rate, insurance, maintenance costs, and monthly rent. The calculator compares cumulative costs year-by-year, showing the break-even point and long-term financial advantage of each option.

Understanding the inputs

Home price: Target purchase price in your market.

Down payment %: 5%, 10%, 20%, etc. Higher = lower mortgage but takes longer to save.

Mortgage rate: Current or expected rate. Use Federal Reserve H.15 (2025) benchmarks: ~5.5–6.5%.

Property tax rate: Annual property tax as % of home value. Varies by state: CA ~0.6%, NJ ~2.1%, TX ~1.8%.

Home insurance: Annual homeowners insurance. Typical: $1,000–$2,000. Higher in areas with high risk (hurricanes, earthquakes).

Maintenance/repairs: Annual allowance for upkeep. Industry rule: 1% of home value annually. For a $300k home, budget $3,000/year.

Monthly rent: Current or expected rent in your area. If unsure, check Zillow rentals for your target neighborhoods.

Why rent vs. buy is complex

Renting advantages

• Flexibility: Move within 1–2 months vs. 3–6 months to sell a home
• Predictability: Rent increase capped by lease; mortgage is fixed; but taxes, insurance, maintenance are variable
• No maintenance risk: Landlord covers major repairs
• No market risk: You don’t lose money if prices fall
• Lower upfront cost: Deposit + first month’s rent ($2k–$4k) vs. down payment + closing ($20k–$80k)

Buying advantages

• Build equity: Mortgage payments build home equity; rent is gone forever
• Fixed payment: Mortgage stays constant; rent rises with inflation
• Tax benefits: Deduct mortgage interest (up to $750k loan) and property taxes (up to $10k/year) on federal return
• Forced savings: Monthly mortgage payment builds wealth discipline
• Leverage: Control $300k asset with $60k down payment
• Emotional value: Stability, pride of ownership, customization

The rent vs. buy decision framework

Buy if:

• You plan to stay 7+ years
• You can afford 10–20% down payment
• Mortgage rates are below 6.5%
• Home prices are stable or appreciating
• Your income is stable and can cover unexpected repairs

Rent if:

• You might relocate in 1–5 years
• Down payment savings would strain your emergency fund
• Local rents are low relative to buy prices (high rent-to-price ratio)
• You prefer flexibility and minimal maintenance responsibility
• Home prices are falling or stagnant

Key metrics for decision-making

Rent-to-price ratio: Annual rent ÷ home price. Ratios above 5% favor renting; below 3% favor buying. In San Francisco (~2%), buying wins long-term. In Miami (~6%), renting is more attractive.

Break-even period: Use the calculator to find your break-even year. If it’s beyond your likely time horizon, rent.

Affordability: Can you comfortably afford the down payment, closing costs, and monthly mortgage + taxes + insurance + maintenance? Aim for mortgage + taxes + insurance < 28% of gross income.

Related calculators

Use our mortgage calculator to estimate monthly payments. For assessing whether a specific home is affordable for your income, see our home affordability calculator. To plan down payment savings, use our down payment savings calculator.

Hidden costs and long-term considerations

Costs only buyers incur

• Property taxes: 0.6–2.1% of home value annually (paid by homeowner)
• Insurance: $1,000–$3,000/year (required by mortgage lender)
• Maintenance: 1% of home value/year is rule of thumb ($1,000–$3,000 for $100k–$300k home)
• HOA fees: $100–$500+/month in some developments (includes maintenance, amenities)
• Utilities: Typically higher as owner than renter (responsible for all systems)
• Transaction costs: 5–6% of sale price to realtor when selling; 2–5% closing costs when buying (tens of thousands)
• Renovations/upgrades: Unlike renters, owners maintain/improve property at their expense

Costs only renters incur

• Rent: Completely expensed (no equity return)
• Renter’s insurance: $150–$300/year (protects belongings, liability)
• Moving costs: $1,500–$5,000 every 1–3 years if you move frequently

Costs both pay

• Utilities: Both electricity, gas, water (split differently: renter vs. owner)
• Insurance: Different types but both present
• Opportunity cost: Capital tied up in down payment earns no return if buying

Scenarios where rent dramatically beats buy

Scenario 1: Tech worker expecting relocation Company offers 3-year contract in expensive market, but relocation likely after contract. Buying means: down payment + closing costs ($40k on $300k home) + realtor fees when selling ($18k) + potential underwater if prices fall. Renting costs: deposit + moving costs (~$4k total). Rent is clearly better if staying only 3 years.

Scenario 2: Unstable income (freelancer, commission-based work) Risk of job loss or income drop is high. Mortgage lender requires proven income stability (2 years W-2s typically). Rent provides flexibility: lease ends, you downsize or relocate. Buy carries risk: if income drops and you can’t make mortgage, foreclosure damages credit for 7 years.

Scenario 3: Market at historical high with frothy prices During housing bubbles (2006, 2022), prices far exceed historical rent-to-price ratios. A home renting for $2,000/month selling for $800,000 (0.3% ratio) is overpriced. Historically, 0.8–1.5% is normal. Buying at peak bubble often means buying the top of the market.

Scenarios where buy dramatically beats rent

Scenario 1: Rent inflation exceeds home appreciation + mortgage payment stays fixed In some markets, rent rises 4–5% annually while home prices appreciate 2–3% and mortgage payment is fixed. After 10 years, the renter is paying $2,600+/month on a $1,500 starting rent; the buyer still pays $1,500 mortgage (though taxes/insurance rise). The buyer wins decisively.

Scenario 2: Buyer stays 15+ years and aggressively pays down mortgage Long holding periods compound the mathematics in buying’s favor. Equity accumulation accelerates. Extra $200/month in payments cuts 4 years off 30-year mortgage and saves $21k+ in interest. After 15 years, buyer has paid off $120k–$150k in principal while renter has no equity.

Scenario 3: Family prioritizes stability and customization Non-financial benefits matter: putting down roots, painting walls, building garden, knowing your neighbors for decades. Some people value these enough to warrant buy despite marginal financial advantage.

Decision tree framework

Are you planning to stay 7+ years?
├─ NO → Rent (transaction costs favor renting)
└─ YES → Continue below

Is your down payment saved without draining emergency fund?
├─ NO → Rent (build savings first, no stress)
└─ YES → Continue below

Can mortgage + taxes + insurance fit comfortably in 28% of gross income?
├─ NO → Rent (wait for higher income or lower prices)
└─ YES → Continue below

Is home price reasonable relative to rent (rent-to-price ratio < 4%)?
├─ NO (high ratio) → Rent (prices too high relative to rent)
└─ YES → Continue below

Do you want ownership, equity building, stability, customization?
├─ Strongly NO → Rent (flexibility, less responsibility)
└─ YES or indifferent → BUY (7+ year horizon, strong finances, reasonable prices)

Key metrics recap

• Break-even point: Calculate using this tool; if it exceeds your stay duration, rent
• Rent-to-price ratio: Annual rent ÷ purchase price. Below 3% = buy-friendly; above 5% = rent-friendly
• Mortgage qualification: 28% rule for housing costs; 36% for all debt
• Emergency fund: 6–12 months expenses saved before buying
• Credit score: 620+ to qualify for FHA; 740+ for best conventional rates

Maximizing whichever path you choose

If you rent

• Bank rent savings; invest in index funds or retirement accounts
• Build credit for better mortgage rates when you do buy
• Maintain flexibility for career/lifestyle changes
• Use aggressive investing to beat long-term returns vs. home equity

If you buy

• Make extra mortgage payments when possible (extra $100–200/month saves tens of thousands)
• Refinance when rates drop 1%+ from origination
• Renovate strategically (kitchen/bath ROI highest) to build equity
• Maintain home well to protect asset value

Related calculators and resources

Use our mortgage calculator to model specific loan scenarios. For assessing affordability of a specific home, see our home affordability calculator. To calculate down payment savings timeline, use our down payment savings calculator.