Compare the true total cost of homeownership against renting and investing the difference. See which builds more net worth at your time horizon.
Home Purchase Scenario
$80,000
NoteClosing costs estimated at 3% of home price and included in buyer's upfront cost.
Renting Scenario
Market Assumptions
10 yr
After Your Time Horizon
Calculating...
Homeowner
Buyer
Projected Home Value--
Remaining Mortgage Balance--
Home Equity--
Buyer Investment Portfolio--
Buyer Net Worth--
Renter + Investor
Renter
Down Payment Invested (lump sum)--
Monthly Savings Invested--
Total Contributions--
Renter Net Worth--
Buyer - Total Sunk Costs
Total Interest Paid--
Property Tax + Insurance--
Maintenance--
Closing Costs (upfront)--
Total Buyer Sunk Costs--
Renter - Total Sunk Costs
Total Rent Paid--
Total Renter's Insurance--
Total Renter Sunk Costs--
Advertisement
Key Terms Explained
Opportunity Cost
The return you give up by choosing one option over another. In this context, the investment gains foregone when cash is tied up in a down payment rather than the stock market.
Equity
The portion of your home you actually own, calculated as the home's current market value minus the remaining mortgage balance. Equity grows as you pay down principal and as the home appreciates.
Amortization
The gradual payoff of a loan through fixed regular payments that cover both interest and principal. Early payments are mostly interest; later payments shift toward principal.
Sunk Costs
Money already spent and unrecoverable. Rent, mortgage interest, property taxes, insurance, and maintenance are all sunk costs - they build no lasting asset and cannot be retrieved.
Capital Gains
Profit from selling an asset for more than you paid. When you sell a home at a higher price, the difference (above your basis) is a capital gain, potentially subject to taxes.
Appreciation
The increase in a home's market value over time. Historically, U.S. home prices have appreciated about 3-4% per year, though this varies significantly by market and period.
Compound Interest
Earning returns on both your original principal and previously earned returns. Over long periods, compounding causes wealth to grow exponentially rather than linearly.
Principal
The original loan amount you borrowed, separate from interest. Each mortgage payment that reduces the principal directly increases your home equity.
The Complete Guide to the Rent vs. Buy Decision
Whether to rent or buy a home is one of the most consequential financial decisions most people ever make, and it is also one of the most misunderstood. The conventional wisdom that "buying is always better" ignores a crucial counterargument: a renter who invests the money they do not spend on a down payment and monthly housing cost differences can build substantial wealth too. The truth is that the answer depends entirely on your numbers, your market, and your time horizon.
How to Use This Calculator
Start by entering the home price you are considering and set your down payment percentage using the slider. Enter the current mortgage rate, choose your loan term, and fill in your estimates for property taxes, insurance, and maintenance. Then switch to the renting panel and enter what a comparable home would rent for in your area, plus the annual rent increase you expect. Finally, set your time horizon - how many years you plan to stay - and your market return assumptions. The results update instantly.
The "Net Worth" figures shown are not just raw costs: they account for investment growth. The renter's net worth includes the compounded return on their down payment (invested from day one) plus any monthly savings they invest along the way. The buyer's net worth is their home equity plus any investment portfolio they build if buying is cheaper month-to-month.
Why the Time Horizon Is the Biggest Variable
Buying a home involves large upfront costs - a down payment, closing costs (typically 2-5% of the purchase price), and moving expenses. These costs must be "earned back" through appreciation and equity building before buying starts winning financially. In the first few years, a renter who invests those same dollars almost always comes out ahead. The breakeven point for most buyers is somewhere between 5 and 10 years, depending on the market. If you plan to move in 3 years, the math almost always favors renting. If you are staying 20 or 30 years, buying typically wins.
The Hidden Costs Buyers Forget
When people compare renting to buying, they often only look at the mortgage payment versus rent. This understates the true cost of ownership significantly. Property taxes and insurance typically add 1.2-2% of the home's value per year on top of the mortgage. Maintenance and repairs add another 1-2%. A $400,000 home can easily cost $8,000 to $16,000 per year in these non-principal costs alone, on top of mortgage interest. Factoring in these realistic costs often makes renting far more competitive than a surface-level comparison suggests.
FAQ
Opportunity cost is the return you give up by choosing one option over another. In the rent vs. buy decision, a buyer commits a large down payment and closing costs as cash that is locked in home equity rather than invested in the stock market. A renter who invests that same lump sum, plus any monthly savings from a cheaper rent payment, earns compounding investment returns instead. Those foregone investment gains are the opportunity cost of buying. A complete rent vs. buy analysis must account for this because ignoring it significantly overstates the financial advantage of buying - especially over shorter time horizons.
Not at all. Every dollar a homeowner pays in mortgage interest, property taxes, insurance, and maintenance is also gone forever - those are sunk costs just like rent. In the early years of a 30-year mortgage, the majority of each monthly payment goes toward interest rather than building equity. A renter who invests the down payment and any monthly cost savings can build substantial net worth through compound investment returns, often rivaling or exceeding a homeowner's equity over shorter time horizons. Whether buying or renting wins financially depends on local home prices, rent levels, time horizon, and expected returns - not on a blanket rule.
A widely used rule of thumb is 1% of the home's value per year for maintenance and repairs. A $400,000 home would average $4,000 per year, or about $333 per month. Older homes, homes in harsh climates, or homes with major systems nearing end of life can run higher - closer to 1.5% to 2% per year. This estimate is often overlooked by prospective buyers who focus only on the mortgage payment, but it represents a significant ongoing cost of homeownership. This calculator uses 1% as the default, which you can adjust for your specific property.
Buying a home involves large upfront costs - typically 20% down plus 2% to 5% in closing costs - that must be spread over the period you live there to justify the purchase. In the first few years, these costs are so high that renting and investing almost always wins financially. The longer you stay, the more the upfront costs are amortized, home appreciation compounds, and equity builds through mortgage paydown. Most analyses show buying breaks even at somewhere between 5 and 10 years depending on your market. If you plan to move in 3 years, renting is almost certainly better financially. If you plan to stay 15 to 30 years, buying is more likely to win.
The calculator runs a month-by-month simulation for both scenarios across your selected time horizon. For the buyer, it tracks total monthly housing costs (principal, interest, taxes, insurance, maintenance), the remaining loan balance, and the home's appreciated value. For the renter, it tracks total monthly costs (rent plus insurance), and invests the down payment from day one plus any monthly surplus (the amount by which buying costs exceed renting costs each month, or vice versa). At the end of the time horizon, the buyer's net worth is home equity (appreciated value minus remaining balance) plus any investment portfolio, and the renter's net worth is their fully compounded investment portfolio. The scenario with the higher net worth wins.
This calculator provides estimates for educational and planning purposes only. Results are based on the inputs you provide and use simplified financial models. Actual home values, investment returns, tax rates, and costs will vary. This is not financial, tax, or legal advice. Consult a qualified financial advisor before making any home purchase or investment decision. All calculations run entirely in your browser - no data is sent to any server.