Rent vs Buy Calculator
Should you rent or buy? This calculator compares the true cost of each option over time, including all hidden costs, tax benefits, investment returns, and home appreciation. See which option builds more wealth.
Home Purchase Details
Rental Details
Assumptions
After 10 Years
by $85,505
Monthly Cost Comparison (Year 1)
| Expense | Buy | Rent |
|---|---|---|
| Housing Payment | $2,129 | $2,000 |
| Property Tax | $400 | $0 |
| Insurance | $125 | $17 |
| Maintenance/HOA | $333 | $0 |
| Total Monthly | $2,987 | $2,017 |
Net Worth Over Time
Year-by-Year Comparison
| Year | Home Value | Home Equity | Rent Investment | Buy Advantage |
|---|---|---|---|---|
| Year 1 | $412,000 | $95,251 | $110,679 | -$15,429 |
| Year 3 | $437,091 | $127,565 | $150,264 | -$22,700 |
| Year 5 | $463,710 | $162,489 | $193,056 | -$30,567 |
| Year 7 | $491,950 | $200,278 | $239,368 | -$39,090 |
| Year 9 | $521,909 | $241,217 | $289,553 | -$48,335 |
| Year 10 | $537,567 | $262,967 | $316,218 | -$53,251 |
Rent vs Buy Considerations
Hidden Costs of Buying
Beyond mortgage payments: property taxes, insurance, maintenance (1-2%/year), HOA fees, closing costs (2-5% buying, 6-10% selling), and opportunity cost of down payment.
Benefits of Buying
Building equity, potential appreciation, fixed housing costs (with fixed-rate mortgage), tax benefits, and freedom to modify your home. Forced savings through mortgage payments.
Benefits of Renting
Flexibility to move, no maintenance costs, lower upfront costs, ability to invest the difference in stocks (historically higher returns than real estate), no market risk on home value.
Frequently Asked Questions
Is it better to rent or buy a house?
It depends on your situation. Buying may be better if:
- You'll stay at least 5-7 years
- You have stable income and job security
- You want to build equity and have a fixed payment
- Local rent is high relative to buying costs
Renting may be better if:
- You need flexibility to move
- Buying is significantly more expensive than renting
- You prefer investing in stocks over real estate
- You don't want maintenance responsibilities
What is the 5% rule for rent vs buy?
The 5% rule is a quick estimate: multiply the home value by 5% and divide by 12 to get the monthly break-even rent.
Example: $400,000 home × 5% ÷ 12 = $1,667/month
If you can rent for less than this, renting may be financially better. This rule accounts for property taxes (~1%), maintenance (~1%), and cost of capital (~3%).
What are the hidden costs of buying?
- Property taxes: 1-2% of home value per year
- Homeowners insurance: $1,000-3,000/year
- Maintenance: 1-2% of home value per year
- HOA fees: $0-500+/month
- Closing costs (buying): 2-5% of home price
- Closing costs (selling): 6-10% of home price
- PMI: 0.5-1% if down payment under 20%
- Opportunity cost: Down payment not invested
How long should I stay to make buying worth it?
Generally, plan to stay at least 5-7 years to make buying worthwhile. This allows time to:
- Recoup closing costs (2-5% buying + 6-10% selling)
- Build meaningful equity
- Benefit from potential appreciation
Use this calculator with your specific numbers to find your break-even point.