What this calculator does
Find out whether renting or buying a home would leave you with more money after the years you plan to stay. The calculator follows two households over the same number of years. One buys a home with a mortgage. The other rents, and invests the money the buyer put into the down payment and closing costs.
Each month, both spend the same total. Whichever path is cheaper that month invests the difference. At the end, the calculator sells the home on paper and pays off the loan and the selling costs. Then it compares the two net worths (what each household owns, minus what it owes).
Comparing rent with a mortgage payment alone can mislead you either way. Owning adds property tax, insurance, upkeep and large one-time costs to buy and sell. But part of every payment builds equity (the share of the home you own outright), and the home may rise in value.
Renting avoids those costs. But the renter only comes out ahead if the money not spent on the house is actually invested. Putting both into net worth, at rates you choose, gives a fair side-by-side answer. You'll also see the year when buying starts to pay off.
Where it's used
Why this math matters outside the classroom:
- Deciding to buy. A couple paying $2,200 rent compares a $400,000 purchase over 7 and 15 years and finds buying breaks even in year 9.
- Relocation planning. Workers expecting to move in three years check whether buying and selling costs of about 9% of the price can be recovered.
- Financial planning. Planners show clients how a 3% versus 5% investment return changes the rent-or-buy result.
- Growth models. Students model a home's value as 400,000 × 1.03^t and rent as 2,200 × 1.03^t to compare two exponential functions.
- Housing research. Analysts compare local rent and price levels to judge whether owning or renting is cheaper in a city.
Grade level and standards: Grades 11–12; Common Core State Standards for Mathematics HSA.SSE.B.4, HSF.LE.A.2. © Copyright 2010. National Governors Association Center for Best Practices and Council of Chief State School Officers. All rights reserved.
How to use it
- Enter your current rent and how fast you expect it to rise.
- Enter the home price, down payment, mortgage rate and term, and the costs of buying and later selling.
- Enter the yearly costs of owning: property tax, insurance, maintenance and any HOA dues.
- Set the home price growth, the return you'd earn on investments and how many years you expect to stay. Then read which choice comes out ahead, by how much, and the break-even year.
What the inputs mean
- Rent increase
- Rent is held flat within each year and raised by this percentage at the start of the next.
- Buying closing costs
- Lender fees, title, transfer taxes and other closing costs on the purchase, as a share of the price.
- Selling costs
- The agent commission and other costs of selling at the end, as a share of the sale price.
- Maintenance and repairs
- A common rule of thumb is about 1% of the home's value a year. Older homes may need more.
- Home price growth
- No one knows future prices. Try a few values, including a low or negative one, to see how much the answer changes.
- Investment return
- The yearly return the money not put into the home would earn. A higher return favors renting.
- Years you expect to stay
- The answer often flips with time. The longer you stay, the more years the buying and selling costs are spread over.
Formula and method
mortgage payment = L × i ÷ (1 − (1 + i)^(−n)), with i = rate ÷ 100 ÷ 12 monthly cost of owning = mortgage + value × tax % ÷ 12 + insurance ÷ 12 + value × maintenance % ÷ 12 + HOA rent in year y = rent × (1 + rent increase)^(y − 1) home value after y years = price × (1 + growth)^y each month: both portfolios grow by (1 + return)^(1/12); the cheaper path invests the difference buyer's net worth = value × (1 − selling %) − loan balance + buyer's investments renter's net worth = renter's investments (starting with down payment + buying costs) advantage of buying = buyer's net worth − renter's net worth
In the mortgage formula, L is the loan amount and n is the number of monthly payments. i is the monthly interest rate: the yearly rate ÷ 12, as a decimal. y counts the years. Growth, rent increase and return are yearly rates as decimals, so 3% is 0.03.
Both households get the same money. The renter starts with what the buyer spends at closing. Every month, the one with lower housing costs invests the gap. So the question becomes which use of the same money builds more wealth, not which bill is smaller.
The buyer's wealth is home equity after a sale, plus any savings from months when owning was cheaper than renting. Equity grows as the loan is paid down and the home rises in value. Selling costs cut into it. The renter's wealth is an investment account that grows at the investment return, with growth earning more growth.
The break-even year is the first year-end when the buyer's net worth would match or beat the renter's, if the home were sold then.
Worked example
Rent is $2,200 a month, rising 3% a year. The home costs $400,000 with 20% down and a 30-year loan at 6.5%. Buying costs 3% and selling costs 6%. Property tax is 1.1%, insurance $1,800 a year, maintenance 1% and there's no HOA. Home prices grow 3% a year, investments return 5%, and you stay 7 years.
- Loan: $400,000 − $80,000 = $320,000, with a payment of $2,022.62 a month.
- First month of owning: $2,022.62 + $366.67 tax + $150.00 insurance + $333.33 maintenance = $2,872.62, against $2,200 of rent.
- The renter invests the buyer's $92,000 of up-front money ($80,000 down plus $12,000 of buying costs), then adds the monthly difference.
- After 7 years the home is worth $400,000 × 1.03^7 ≈ $491,949.55 and the loan balance is $289,331.98.
- Buyer's net worth: $491,949.55 × (1 − 6%) − $289,331.98 ≈ $173,100.59. Renter's net worth: about $183,421.65.
- Advantage of buying: $173,100.59 − $183,421.65 ≈ −$10,321.06.
Result: Over 7 years, renting comes out about $10,321.06 ahead under these assumptions. Staying 15 years flips the result. Buying breaks even in year 9 and is about $66,497.36 ahead by year 15.
Understanding the result
A positive result means buying leaves you better off after the years you entered. A negative one means renting does. Treat small differences either way as a tie. Modest changes in the assumptions move the answer by more than that.
The break-even year is often the most useful number. If you're confident you'll stay well past it, buying comes out ahead under these assumptions. If you might move sooner, the one-time buying and selling costs are hard to win back.
Test the answer against the inputs you're least sure of, especially home price growth and the investment return. If the answer still holds with gloomy values, you can trust it more.
Assumptions and limitations
- The mortgage has a fixed rate and monthly payments. The home's value grows once a year at a steady rate. Tax and maintenance are a share of each year's starting value.
- Both households spend the same each month. Every dollar of difference is invested at the same steady return, with growth added monthly.
- The home is sold at the end of the period, paying the selling costs and the remaining loan balance.
- Income taxes are ignored. There's no mortgage-interest or property-tax deduction, and no tax on investment gains or home sale gains.
- PMI (insurance a lender may require when you put down less than 20%), renter's insurance, security deposits, moving costs and rent-control or lease terms aren't modeled.
- Real returns vary from year to year. Steady rates hide the risk that either choice does badly over your particular stretch of years.
- Non-financial factors, such as stability, flexibility and control over the home, are left for you to weigh.
- This is an estimate under assumptions you choose, not a forecast or advice.
Frequently asked questions
Why does renting come out ahead in the short run?
Buying and selling a home each cost several percent of its price. Early mortgage payments are mostly interest. Over a few years, equity growth may not cover those costs. Meanwhile the renter's invested down payment keeps growing. With more years, rising home value and loan paydown usually catch up. That's what the break-even year shows.
What if I wouldn't actually invest the difference?
Then renting looks better here than it would be for you. Set the investment return to 0% to model money that sits in a low-interest account. On the default figures, that makes buying far more attractive.
Is rent money wasted?
Rent buys housing, just as interest, property tax, insurance and maintenance do for an owner. An owner never gets those costs back either. The fair comparison is between all the costs of each path that you never get back. Comparing net worth captures exactly that.
Does the mortgage interest deduction change the answer?
It can for people who itemize deductions. But many households take the standard deduction and get no benefit. Taxes are left out to keep the comparison general. If you do itemize, buying will look somewhat better than shown.
How this calculator is checked
Method: Net-worth comparison with equal monthly outlays: standard level-payment mortgage, compound appreciation of the home, and monthly compounding of invested differences at an effective yearly return. The calculation is covered by automated tests with known reference values and edge cases. Last updated 2026-10-18. Found a problem? Tell us.
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