What this calculator does
It follows the same household down two paths, buying a home now or renting and investing the cash instead, and measures what each path leaves you with on the day you move.
Comparing rent with a mortgage payment misleads in both directions. Owning costs more than the payment: property tax, insurance, maintenance, sometimes PMI and HOA dues, plus the one-time costs of buying and later selling. But part of each payment is principal that comes back when you sell, and the home may gain value. A renter avoids those costs, builds no equity, and keeps the down payment free to invest.
So this calculator compares net worth, not monthly cost. The headline says which path is ahead after the years you plan to stay, and by how much. The break-even year is when buying first catches up, and the chart follows both paths for 30 years in case your plans change. Every assumption is yours; the starting values are placeholders, not a forecast.
How the math works
The model steps through time month by month, keeping a balance sheet for each path.
- Buying. On day one you pay the down payment and closing costs. Each month you pay principal and interest, property tax and maintenance (each a percentage of the home's current value), insurance, HOA dues, and PMI while the loan balance is above 78% of the price.
- Renting. The down payment and closing costs are invested instead. Each month you pay rent, which rises once a year, plus renters insurance.
In any month, whichever path costs less invests the difference, compounded monthly so a full year matches your annual return. For the renter:
- R
- the renter's investment balance after month m; it starts at the down payment plus closing costs
- i
- monthly return: (1 + annual return)1/12 − 1
- d
- that month's owning cost minus renting cost, when owning costs more (otherwise the buyer invests the gap)
When you move, the buyer sells. Net worth on each path is then:
- V
- home value when you move: the price grown by your price-growth rate
- c
- cost to sell, as a share of the sale price
- B
- loan balance still owed
- S
- the buyer's invested savings from months when owning cost less than renting (often zero)
The headline is the difference; the break-even year is the first year-end at which buying's figure is at least as large as renting's. Insurance, HOA dues and renters insurance stay at the amounts you enter for the whole period, a simplification, since in practice they can change.
Worked example
Take a $350,000 home with 10% down, a 6% 30-year loan, closing costs of 3% and selling costs of 6%. Tax and maintenance are 1% of the value each, insurance $1,200 a year, PMI 0.5%. A comparable rental costs $1,900 a month plus $15 for renters insurance. Rent and prices rise 3% a year, investments earn 6%, and you stay 7 years.
Worked example
- Cash up front: down payment $35,000 + closing costs $10,500 = $45,500. On the renting path, this is invested on day one.
- First month of owning: principal and interest $1,888.58 + tax and maintenance (1% + 1%) × $350,000 ÷ 12 = $583.33 + insurance $100.00 + PMI $131.25 = $2,703.16. Renting: $1,900.00 + $15.00 = $1,915.00.
- The $788.16 gap goes into the renter's investments that month. The gap shifts as rent and the home's value rise, and the balance compounds. After 7 years the renter holds $138,981.71.
- After 7 years the home is worth $430,455.85. Selling costs take $25,827.35 and the loan balance is $282,364.48, leaving the buyer $122,264.02.
After 7 years, renting comes out ahead by $16,718: $122,264 if you buy against $138,982 if you rent. With these numbers, buying pulls ahead in year 11.
The answer is sensitive to the assumptions. Raise home price growth from 3% to 4% and, after 7 years, buying comes out ahead by $9,400; buying pulls ahead in year 6. Keep 3% growth but let investments earn 4% instead of 6%, and renting comes out ahead by $3,123. Keep the original numbers but stay 15 years, and buying comes out ahead by $39,003. Try several combinations rather than trusting one.
Common mistakes
- Comparing rent with the mortgage payment. The payment leaves out tax, insurance, upkeep and the cost of buying and selling, and it hides the principal you get back. Net worth counts all of it.
- Ignoring how long you will stay. Closing and selling costs are paid once whether you stay two years or twenty, and early payments are mostly interest. A short stay gives buying little time to recover. Move the "years you would stay" slider and watch the headline.
- Assuming the difference gets invested. The renting path assumes every spare dollar is invested and left alone. If it would be spent, renting's figure is too high.
- Mixing inflation-adjusted and ordinary rates. State price growth, rent increases and investment return the same way. An after-inflation return next to an ordinary price-growth figure tilts the result toward buying; the reverse tilts it toward renting.
- Leaving maintenance at zero. Roofs, furnaces and appliances wear out whether or not you plan for them.
Limits of this estimate
- Income taxes are left out: no tax on investment gains, no mortgage interest or property tax deduction, and no capital gains rules on the home sale. Each can move the result either way.
- Insurance, HOA dues and renters insurance are held flat. Property tax and maintenance grow only with the home's value.
- Growth and return rates are constant. Real markets move unevenly, and a weak year just before you move matters more than an average suggests.
- Moving costs, furnishing, renovations, special assessments and rental deposits are not included.
- The loan is fixed-rate with no extra payments or refinancing, and PMI stops once the scheduled balance falls to 78% of the price.
- Net worth is not cash. Equity can only be spent by selling or borrowing against it, and one home is a more concentrated holding than a diversified investment account.
Frequently asked questions
Why compare net worth instead of monthly cost?
Because the two monthly figures buy different things. A mortgage payment also repays principal you get back when you sell, while tax, insurance and upkeep cost an owner money a renter never spends. Net worth puts both paths on the same footing: what you would have if you moved on a given date.
What does the break-even year mean?
It is the first year-end at which buying leaves you with at least as much as renting, using your numbers. Move before then and renting comes out ahead in this model. After it, buying is ahead unless the lines cross back later, which the chart and table would show.
What investment return should I enter?
There is no correct figure, and this site does not suggest one. Use what you would realistically expect the money to earn after fees, stated the same way as your home price growth. Trying a low, middle and high case shows how much the answer depends on it.
Does it include the mortgage interest deduction?
No. Whether it helps depends on whether you itemize, your tax bracket and the law at the time, so income taxes are left out entirely. That cuts both ways: tax on the renter's investment gains and on any profit from selling the home are ignored too.
Why does buying start out behind?
On day one the buyer has spent closing costs and would pay selling costs to move straight away, while the renter still holds the full down payment and closing costs. Buying has to make up that head start through principal repayment and price growth.
What about the parts of the decision that are not about money?
Owning and renting differ in stability, control over the home, freedom to move and time spent on upkeep. Households weigh these differently, and none has a price a calculator could use.
Next steps: the mortgage payment calculator shows the full monthly cost of this home on its own. The cash to close calculator itemizes what buying would take on closing day, and the affordability calculator checks the price against your income.