The Rent vs Buy Calculator settles the oldest argument in personal finance with a net-worth simulation instead of slogans: over the years you choose, it models the buyer (mortgage, taxes, maintenance, appreciation, selling costs) and the renter (rent with increases, insurance, and the down payment plus monthly savings invested instead), then compares the two net-worth positions year by year.
How It Works
The buyer's wealth is home equity: the appreciated home value minus the remaining loan balance and the cost of selling. The renter's wealth is an investment portfolio: it starts with the down payment and closing costs the renter never spent, and each month it absorbs the cash-flow difference (whenever renting is cheaper that month, the saving is invested; whenever buying is cheaper, the renter's portfolio funds the difference). Both sides compound monthly: the home at your appreciation rate, the portfolio at your investment return, the rent at your rent-increase rate. The calculator reports both net worths, the sunk costs on each side (interest, taxes, maintenance, and selling costs for the buyer; rent and insurance for the renter), and the verdict with the size of the gap.
Parameters
| Input | Required | Meaning | |---|---|---| | Home price, down payment % | Yes | The purchase being considered | | Mortgage rate and term | Yes | The loan | | Property tax and maintenance rates | Yes | Annual percentages of home value | | Appreciation rate | Yes | Expected annual home-price growth | | Closing and selling costs % | Yes | Entry and exit transaction costs | | Monthly rent and rent increase | Yes | The rental alternative and its growth | | Renter insurance | No | Monthly renter cost | | Investment return | Yes | What the renter's portfolio earns | | Years to compare | Yes | The holding horizon |
Worked example
A 2,275), property tax at 1.1% and maintenance at 1% of value, closing costs 3%, selling costs 6%, appreciation 3%: against renting at 7,700 (equity near 189,000), because closing and selling costs plus the interest-heavy early mortgage years eat the start. By year 10 the gap widens to roughly 265,600 against about 2,100 and the verdict flips at every horizon: the renter's monthly saving is simply too large for equity to catch. The example is the lesson: the answer lives in the rent-to-price relationship and the horizon, not in ideology.
The variables that actually decide it
Horizon first: transaction costs of roughly 9% round-trip need years of equity growth to recover, which is why buying for under five years usually loses. The rent-to-price ratio second: when equivalent rent is cheap relative to price, renting and investing wins for a long time. Investment return third: the renter's case depends entirely on actually investing the difference at the assumed return; a renter who spends the difference loses to both columns. Appreciation fourth: at the long horizons, a point of appreciation overwhelms most other inputs, which is why the honest use of this calculator is a sensitivity table (run appreciation and return each a point lower) rather than a single run.
Sunk costs: the honest framing
The sunk-cost columns expose the "rent is throwing money away" fallacy in numbers: the buyer also throws money away, on interest, taxes, maintenance, insurance, and transaction costs, and in the early years those unrecoverable costs typically exceed rent. What the buyer recovers is principal and appreciation; what the renter recovers is the invested difference and its returns. Comparing total payments (a common shortcut) is the one framing guaranteed to mislead, because it counts principal as a cost for the buyer and ignores investment for the renter.
Limitations
The model is deterministic: steady appreciation, steady returns, no vacancies or landlord failures on one side, no major repairs, job moves, refinancing, tax deductions, or HOA and PMI lines unless folded into the rates you enter. It assumes the renter invests every dollar of difference with perfect discipline. Treat the output as a scenario comparison under stated assumptions, the right way to structure the decision, not as a prediction about your street or your portfolio.
Frequently Asked Questions
How long do I need to stay for buying to win?
In most modeled scenarios the break-even sits between years five and ten, earlier when rent is high relative to price, later (or never) when rent is cheap. The year-by-year table shows your specific crossing point; if your realistic stay is shorter than it, rent.
Why does the renter start with a portfolio?
Because the renter did not spend the down payment and closing costs. Comparing a buyer who spent $103,500 upfront against a renter who is assumed to have burned the same money would rig the result; the invested difference is the renter's actual alternative.
Should I count mortgage interest tax deductions?
If you itemize and your jurisdiction allows the deduction, it improves the buyer's case modestly, mostly in early years. The model has no tax lines, so treat its buyer figures as slightly conservative in that specific respect and note it beside the result.