Compare the true cost of renting and buying over time, including mortgage interest, taxes, maintenance, home appreciation, selling costs and what your down payment could earn if invested, to find your break-even year.
Is it cheaper to rent or buy?
Comparing rent with a mortgage payment is misleading. Owners pay property tax, insurance and maintenance, and they lose money to buying and selling costs, but they also build equity and benefit if the home rises in value. Renters avoid those costs and can invest the cash they would have used for a down payment. This calculator adds all of that up year by year.
How the comparison works
Net cost of buying for a given year = down payment + buying costs + mortgage payments + property tax + insurance + maintenance − (the home's value after selling costs − remaining mortgage balance).
Net cost of renting = all rent paid − investment growth on the money you did not spend on a down payment and closing costs.
The break-even year is the first year where buying's net cost falls below renting's. If you expect to stay longer than that, buying is likely to come out ahead.
Worked example
Rent is $2,000 a month, rising 3% a year. The alternative is a $350,000 home with 20% down, a 6.5% 30-year mortgage, 1.2% property tax, $1,500 insurance, 1% maintenance, 3% buying costs, 6% selling costs and 3% yearly home value growth. Cash left invested would earn 5%.
| Year | Net cost of renting | Net cost of buying |
|---|---|---|
| 1 | $19,975 | $48,938 |
| 5 | $105,179 | $115,777 |
| 7 | $151,128 | $147,200 |
| 10 | $224,507 | $191,371 |
Buying starts behind because of the upfront and selling costs, then pulls ahead in year 7. By year 10 it is about $33,000 cheaper. If you might move within five years, renting would have been the better choice.
Which assumptions matter most?
- How long you stay. This is usually the biggest factor because buying and selling costs are large.
- Home value growth. Small changes compound over many years. Try a lower figure to stress-test the result.
- Rent increases in your area.
- Investment return. A higher return on invested cash makes renting look better.
Frequently asked questions
Does the calculator include tax deductions?
No. Many homeowners take the standard deduction and do not benefit from deducting mortgage interest. If you itemize, buying may look slightly better than shown.
Is renting "throwing money away"?
No. Rent buys housing with flexibility and no maintenance risk. Owners also pay costs they never get back, such as interest, taxes and repairs. The question is which costs less for your situation.
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Results are estimates for planning and education only. They are not financial, tax, legal or medical advice. Check important numbers with a qualified professional.