Rent vs Buy Calculator
Comparing a mortgage payment against rent is the wrong comparison, because part of a mortgage payment buys equity and rent buys none — while property tax, maintenance and interest buy nothing either. This compares what you actually end up with under each path.
Your inputs
Your result
Formula
Why the usual comparison is wrong
“Rent is dead money” treats the whole mortgage payment as if it builds wealth. It does not. In the early years of a thirty-year loan, most of the payment is interest, and interest is as dead as rent. Add property tax, insurance, maintenance and the costs of buying and selling, and a large share of what an owner pays each month buys nothing at all.
The honest question is not which monthly payment is smaller. It is which path leaves you with more after the years you actually plan to stay.
The renter is assumed to invest, because otherwise it is not a comparison
A buyer puts a large sum into a deposit and closing costs. If the renter spends that instead, buying wins trivially and the calculation proves nothing. Here the renter invests it, and invests the monthly difference in any month where renting costs less. If in practice you would not invest it, buying is likely the better choice for you — a mortgage is a forced savings plan, and that has real value.
How long you stay decides almost everything
Buying costs several percent to enter and around six percent to leave. Those are paid regardless of how long you own, so short stays rarely recover them. The break-even is commonly somewhere around five years, but it moves with appreciation, rates and the gap between rent and ownership costs. Set the years to three and then to fifteen — the answer often flips.
Maintenance is the line owners underestimate
One percent of value per year is the usual rule of thumb, and it is an average across good years and the year the roof goes. On a $400,000 home that is $4,000 a year that a renter simply does not pay.
Frequently asked questions
Is it better to rent or buy?
It depends mostly on how long you will stay, the gap between rent and total ownership costs, and what you would otherwise do with the deposit. Short stays and high ownership costs favour renting; long stays and modest ownership costs favour buying.
How long do I need to stay for buying to pay off?
Frequently around five years, but it varies widely. The transaction costs of buying and selling are the main hurdle, and appreciation is what clears it.
Does this include the tax deduction on mortgage interest?
No. Since the standard deduction rose, most US filers no longer itemise, so the deduction has no effect for them. If you do itemise, buying will look somewhat better than shown here.
Why does renting sometimes win even over a long period?
Because the deposit invested elsewhere compounds too. When ownership costs are high relative to rent and appreciation is modest, the invested deposit can outrun the equity.