Rent vs. Buy Calculator

Often five to seven years, but it depends on your numbers. Buying and later selling cost about 9% of the price, and early mortgage payments are mostly interest, so it takes time for equity and appreciation to catch up. In our example, buying pulls ahead in year 7. Change the years above to find your own break-even.

No. Rent buys you a place to live, just as mortgage interest, property tax and upkeep do for an owner. None of those build equity. The real comparison is what each choice leaves you with after all costs. Renters who invest the money they'd otherwise put into a home can end up ahead, especially over shorter stays.

It's a quick check. Multiply the home price by 5% and divide by 12. If you can rent a similar home for less than that, renting may be the better deal. For a $400,000 home, that's $1,667 a month. The 5% is a rough total of property tax, upkeep and the return you give up on your money. Our calculator runs the full comparison instead.

It's the home price divided by a year's rent. A $400,000 home that rents for $2,500 a month has a ratio of about 13. Lower ratios, around 15 or under, tend to favor buying. Ratios above 20 tend to favor renting. It's a shortcut that ignores rates, taxes and how long you stay, so use it alongside the calculator.

Closing costs usually run 2% to 5% of the price, covering lender fees, an appraisal, title insurance and taxes. You also pay property tax, insurance and upkeep every year. We assume 1.1% tax, 1% upkeep and $1,500 insurance. When you sell, agent fees and other costs often add up to 6% or more.

Yes. A higher rate raises the monthly cost of owning, and that difference goes to the renter's investments. In our example, buying is about $31,086 ahead after 10 years at 6.5%, and about $73,422 ahead at 5.5%. If rates fall later, owners may be able to refinance, which this calculator doesn't assume.

Usually it's risky. With our example numbers, buying is still about $10,783 behind renting after 5 years, because the costs of buying and selling haven't been recovered. If you may move, consider whether you'd keep the home and rent it out. Our rental property calculator can show whether that would pay.

Many loans allow 3% to 5% down, and some government loans allow less. Putting less than 20% down usually means paying mortgage insurance until you reach 20% equity. A smaller down payment leaves more cash for the renter's side of the comparison to invest, which this calculator accounts for. Try different amounts above.

No. US home prices have risen over long periods, but they fell sharply from 2006 to 2012 in many areas. Local markets can be flat for years. We assume 3% a year, which you can change. At 4%, buying comes out about $76,013 ahead after 10 years in our example. At 0%, it's much less likely to win.

We assume they invest it, starting with the down payment and closing costs, plus any month where owning costs more than rent. That's the key to a fair comparison. If you'd spend the difference instead, buying usually looks better, because a mortgage acts as forced savings through the principal you pay each month.

No. We leave out income taxes, including the mortgage interest deduction and taxes on investment gains. Most households take the standard deduction, so the mortgage interest deduction often doesn't help. Home sale profits up to $250,000, or $500,000 for married couples, are usually tax-free for a main home. Check IRS guidance for your situation.